Question 1187518: A producer of pottery is considering the addition of a new plant to absorb the backlog of demand that now exists. The primary location being considered will have fixed costs of $9,200 per month and variable costs of 70 cents per unit produced. Each item is sold to retailers at a price that averages 90 cents.
What volume per month is required in order to break even?
Fixed Costs = $9200, Variable Costs = $.70 and Retail Value = $.90
QBEP = $9200/($.70-$.90) = 46000 units per month
What profit would be realized on a monthly volume of 61,000 units? 87,000 units?
What volume is needed to obtain a profit of $16,000 per month?
What volume is needed to provide a revenue of $23,000 per month?
Plot the total cost and total revenue lines.
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! profit = revenue minus cost.
revenue .9x
cost = .7x + 9200
profit = .9x - (.7x + 9200) = .2x - 9200.
you can graph that function as shown below:
your answers are shown below:
What volume per month is required in order to break even?
Fixed Costs = $9200, Variable Costs = $.70 and Retail Value = $.90
QBEP = $9200/($.70-$.90) = 46000 units per month.
this is correct.
What profit would be realized on a monthly volume of 61,000 units? 87,000 units?
profit at 61000 units is 3000.
profit at 87000 units is 8200
What volume is needed to obtain a profit of $16,000 per month?
126000 units.
What volume is needed to provide a revenue of $23,000 per month?
23000
plot the total cost and total revenue lines.
done above.
to solve these problems, use the formula of y = .2x - 9200.
y is the profit
x is the number of units.
for example, when x = 61000 units, profit is .2*61000 - 9200 = 3000
for example, when profit = 23000, formula becomes 23000 = .2x - 9200
add 9200 to both sides to get 32200 = .2x
divide both sides by .2 to get x = 161000.
the coordinate points on the graph are in (x,y) format.
x is the number of units.
y is the profit.
let me know if you have any questions.
theo
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