SOLUTION: To produce 1 unit of a new product a company determines that the cost for material is $2.50 and the cost of labour is $4.The constant overhead ,regardest of sales volumes,is $500.I
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Question 156344: To produce 1 unit of a new product a company determines that the cost for material is $2.50 and the cost of labour is $4.The constant overhead ,regardest of sales volumes,is $500.If the cost to a whole saler is $7.40 per unit ,determine the least number of units that must be sold by the company to realize a profit
You can put this solution on YOUR website! total cost of production is 500 + (x * 6.5) where x is the number of units sold.
total money realized from sale is (x * 7.4).
total cost must be < total sale so equation becomes ..............
500 + (x * 6.5) < (x * 7.4)
which becomes 500 < (7.4x - 6.5x)
which becomes 500 < .9x
which becomes (500 / .9) < x
which makes x > 555.55 rounded to > 556 units (partial units not possible).
testing..............
revenue = 555 * 7.4 = 4107; cost = 555 * 6.5 = 3607.5 + 500 = 4107.5 so no profit because cost is greater then revenue.
revenue = 556 * 7.4 = 4114.5; cost = 556 * 6.5 = 3614 + 500 = 4114 so profit is made because revenue is greater than cost.
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