College Creations

College Creations, Inc (CC), builds a loft that is easily adaptable to most dorm rooms or apartments and can be assembled into a variety of configurations. Each loft is sold for $500, and the cost to produce one loft is $300, including all parts and labor. CC has fixed costs of $100,000.

1. What happens if CC produces nothing?
2. Now, assume CC produces and sells one unit (loft). What are their financial results?
3. Now, what do you think would happen if they produced and sold 501 units?
4. How many units would CC need to sell in order to break even?
5. How many units would CC need to sell if they wanted to have a pretax profit of $50,000