1. The fixed costs at Company X are $1 million annually. The main product has
revenue of $8.90 per unit and $4.50 variable cost. (a) Determine the breakeven
quantity per year, and (b) Annual profit if 200,000 units are sold.
2. A product currently sells for $12 per unit. The variable costs are $4 per unit, and
10,000 units are sold annually and a profit of $30,000 is realized per year. A new
design will increase the variable costs by 20% and Fixed Costs by 10% but sales
will increase to 12,000 units per year. (a) At what selling price do we break even,
and (b) If the selling price is to be kept same ($12/unit) what will the annual profit
be?
3. A defense contractor has been able to summarize its total annual fixed costs as
$100,000 and the total variable cost per unit of production as $33. (a) If only 5000
units is all that is expected to sell to the government this year what should the per
unit selling price be to make a 25% profit this year? (b) If foreign sales of 3000
units per year is to be added to the 5000 units government contract above and a
25% profit is acceptable for this contractor again, what could be the new selling
price per unit?