Miss Elvie Lucas earns 2,000 per month as an employee at Silverlucks Bake shop. After 5 years of service in the company, she has learned all the techniques in baking as well as the other trade secrets of her employer. She is now contemplating to quit her job and put up her own bake shop, expecting that she will earn twice as much as her income from Silverbucks. To start with, she will sought the help of an accountant to make an analysis for her project. Following are some data that were noted in the study:

Monthly rental for the bake shop space 2,500.00

Monthly depreciation of store and bake shop equipment 2,000.00

Store supplies 10.00 per unit

Variable manufacturing costs 200.00 per unit

Other fixed manufacturing costs 2,000.00

Selling Price 310.00 per unit

Required: (Show complete solutions)

How many units of cake should Miss Lucas sell to break-even? Use graphic approach.

How many units must Miss Lucas sell per month to earn her expected income?

The accountant suggests that in order to earn the expected income, Miss Lucas has to sell more units, and to attain this, she must advertise her shop and her product. One alternative for this advertising plan is to lease advertising (billboard) spaces at LRT stations at a cost of 3,000 per month. If this plan were included in the projections, how many units must Miss Lucas sell to earn her expected income?