A manufacturing company is studying the feasibility of producing a new product. A new production…

A
manufacturing company is studying the feasibility of producing a new product. A
new production line could manufacture up to 800 units per month at a cost of
$50 per unit. Fixed costs would be $22,400 per month. Variable selling and
shipping costs are estimated to be $20 per unit. Market research indicates that
a unit price of $110 would be competitive.

a. What is
the break-even point as a percent of capacity?

b. What
would be the net income at 90% of capacity?

c. What
would unit sales have to be to attain a net income of $9000 per month?

d. In a
serious recession sales might fall to 55
»

A
manufacturing company is studying the feasibility of producing a new product. A
new production line could manufacture up to 800 units per month at a cost of
$50 per unit. Fixed costs would be $22,400 per month. Variable selling and
shipping costs are estimated to be $20 per unit. Market research indicates that
a unit price of $110 would be competitive.

a. What is
the break-even point as a percent of capacity?

b. What
would be the net income at 90% of capacity?

c. What
would unit sales have to be to attain a net income of $9000 per month?

d. In a
serious recession sales might fall to 55% of capacity. What would be the
resulting net income?

e. What
dollar amount of sales would result in a loss of $2000 per month?

f. In the
highest-cost scenario, fixed costs might be $25,000, production costs might be
$55 per unit, and selling and shipping costs might be $22 per unit. What would
the break-even point be in these circumstances?

»

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