Frobisher Manufacturing Company Homework

Frobisher Manufacturing Company produces one product, a Myrna armchair, described as follows: classic design; comfortable; supporting fabric of pure, sand$-$coloured linen; seat and back wound at the front and attached with leather straps at the back of the seat; frame of solid pine with a clear lacquer finish. The chair is to be sold at a very affordable price, but the company must determine the specific price after conducting break$-$even and profitability analyses. The following information was used by the company:

Fixed Cost. The fixed cost for the year was estimated at $$400,000.$ Included in the cost figure were administrative salaries and insurance premiums, rent, utilities, depreciation of machinery, telephone expense, supplies expense, advertising expense, and marketing costs.

Variable Cost. The variable cost per unit $($for each chair produced$)$ was estimated at $$40.$ included in the direct materials cost were the linen fabric, leather straps, foam, pine wood, and lacquer finish. Direct labor cost was also allocated and included in this figure.

Factory Selling Price. The factory selling price is to be one of four possible prices: $$65,$$$80,$$$100,$ $$120.$

Market Demand. A market research report indicates the following demand for the chairs at the above price levels:

$\backslash$table$[[$Price$,$Market Demand in Units$],[$$$65\mathrm{.}00,15,000],[$$$80\mathrm{.}00,12,000],[$$$100\mathrm{.}00,10,000],[$$$120\mathrm{.}00,7,000]]$

Questions

Determine the break$-$even points in units at each price level.

$\backslash$table$[[(1)$ Unit Price,$\backslash$table$[[(2)$ Unit Variable$],[$Cost$]],\backslash$table$[[(3)$ Contribution$],[$to Overhead $(1)-(2)]],\backslash$table$[[(4)$ Total Fixed Cost$],[$Per Annum$]],\backslash$table$[[(5)$ Break$-$even$],[$Point $($units$)(4)/(3)]]],[$$$65\mathrm{.}00,$L$,,,],[$$$80\mathrm{.}00,,,,],[$$$100\mathrm{.}00,,,,],[$$$120\mathrm{.}00,,,,]]$