The Clapton Guitar Company has set a target to sell 1500 units from its new guitar line this year for a suggested retail price of $479 per unit. The company has estimated that its fixed costs that can be attributed to this new line are $3000 per month. The manager also estimates that the variable costs per unit are $190.
(a) Calculate the break-even volume for the year.
(b) If the company can produce up to 2000 units per year, compute the break-even point as a percent of capacity.
(c) How much profit will Clapton Guitar Company earn if it achieves its target sales?
(d) If an average of only 100 units is sold each month, how much profit will the company realize during the year?
(e) Describe the impact on expected profit if only 100 units are sold each month.