Question
Assume that the cost per unit of a certain product is 7 and regular selling price is 12. The fixed costs are 3000. Find the
Assume that the cost per unit of a certain product is 7 and regular selling price is 12. The fixed costs are 3000. Find the break-even quantity and break-even revenue. In addition, consider the following modifications of the problem. (a) Find the cash break-even quantity under the assumption that the firm has depreciation changes totaling 10% of the fixed cost. (b) Find the break-even quantity and break-even revenue for the firm under the assumption that a target profit of 1000 is set up. 2. Consider a firm that produces souvenir dolls. The fixed costs are 20000 and the variable cost per doll is 12. The firm can produce 50 dolls a day and can sell them for 20 each. In order to start the production process the firm applied for a loan at 6% annual interest rate in order to cover all costs. The firm supposed to receive the money 20 days before production begins. However, the bank required additional documents from the firm in order to approve the loan. As a result, production started 10 days later than expected. The loan has to be paid off in 3 years. Suppose that the firm can collect revenues only 30 days after production begins. Calculate the total cost of interest and determine the break-even time.
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