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ser-zykov [4K]
3 years ago
5

A company is considering opening a new product line. The building being considered will have a monthly lease and utility payment

of $3500. Two employees will be hired at $ 15/hr/employee. Each employee will work 120 hrs per month. The average revenue per unit product sold is estimated at $ 100. The variable cost of production of each unit is estimated at $40.
Required:
a. How many units must be produced each month for the buisness to breakeven?
b. How many units must be produced monthly to achieve a monthly profit of $10,000?
Business
1 answer:
abruzzese [7]3 years ago
4 0

Answer:

Results are below.

Explanation:

<u>First, we need to calculate the total fixed costs:</u>

Total fixed costs= 3,500 + (120*2*15)

Total fixed costs= $7100

<u>Now, using the following formula, we can determine the break-even point in units:</u>

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 7,100 / (100 - 40)

Break-even point in units= 118.33 = 119 units

<u>Finally, the number of units to earn $10,000 in profit:</u>

Break-even point in units= (fixed costs + desired profit) / contribution margin per unit

Break-even point in units= (7,100 + 10,000) / 60

Break-even point in units= 285

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