A small firm produces and sells automotive items in a five-state area . The firm expects to consolidate assembly of its battery chargers line at a single location . Currently, operations are in three widely scattered locations. The leading candidate for location will have a monthly fixed cost

Question

A small firm produces and sells automotive items in a five-state area . The firm expects to consolidate assembly of its battery chargers line at a single location . Currently, operations are in three widely scattered locations. The leading candidate for location will have a monthly fixed cost of $ 42,000 and variable costs of $3 per charger. Chargers sell for $7 each . Prepare a table the shows total profits , fixed costs , variablr costs , and revenues for monthly volumes of 10,000, 12,000, and 15,000 units. What is the break-even point?

Accepted Answer

Revenue = $ 7 per unit

Variable cost = $ 3 per unit

Fixed cost = $ 42,000 per month

Profit = [latex]Q(R - v) - FC[/latex]

Total cost = [latex]FC + v × Q[/latex]

Volume	Total Revenue	Total VC	Fixed Cost	Total Cost	Total Profit
10,000	$70,000	$ 30,000	$ 42,000	$ 72,000	$(2,000)
12,000	84,000	36,000	42,000	78,000	6,000
15,000	105,000	45,000	42,000	87,000	18,000

[latex]Q_{BEP}= \frac{FC}{R - u }= \frac{\$ 42,000}{\$ 7 - \$ 3} =10,500[/latex] units per month

Question 5.P.2: A small firm produces and sells automotive items in a five-s...

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