General Electric is establishing a factory in Northern Carolina. Fixed monthly expenses are factory rent ($9,000 +STT), depreciation on factory machine ($2,000 +STT), utilities ($1,700 +STT), telephone bills ($1,500 +STT), a connection with an online service ($3,000 +STT), and the salary of a worker ($5,500 +STT). Variable costs include payments to the marketer planning (11% of revenue), administration expense (10% of revenue), supplies (5% of revenue), and usage fees for the telephone lines and water bill at the office(10% of revenue).

Requirements:

1. Apply the contribution margin ratio approach to calculate General Electric's breakeven revenue in dollars. If the average service leads to $1,500 in revenue per service for General Electric, how many services must be made to break even?

2. Apply the equation approach to calculate the dollar revenues needed to earn a monthly target profit of $13,400.

3. Suppose that the average revenue General Electric earns increases to $1,600 per service. Compute the new breakeven point in service. How does this affect the breakeven point?