Question

Prepare an economic report with the following production data: Fixed costs: $ 7,000 per day and...

Prepare an economic report with the following production data: Fixed costs: $ 7,000 per day and $ 50 of variable costs. The sale price per unit is $ 70.00; for the production of # 500 perfumes:

a) Break-even point (equilibrium production) in quantity (Q).

b) Determine the variable cost per unit to have a profit of $ 20,000

c) What is the profit per unit ?; if you reduce fixed costs to $ 5,000.
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Homework Answers

Answer #1

Q-A :: ANSWER :: Quantity = 350 Unit

=>Explanation ::

Break Even Point = Fixed Cost/ Selling Price - Variable Cost

= $7000 / $70 - $50

= $7000 / $20

= 350 Unit

Q-B :: ANSWER :: $160 Per Unit

=> Explanation ::

-> Total Revenue = 500 * $70 = $35000

-> Total Fixed Cost = $7000 Per Day

So Profit = Total Revenue - (Fixed Cost + Variable Cost)

So Variable Cost = Total Revenue - Profit - Fixed Cost

= $35000 - $20000 - $7000

= $8000

So Per Unit Variable Cost = $8000/500

= $160

Q-C :: ANSWER :: $10

=> Explanation ::

Profit = Total Revenue - Total Cost

->Total Revenue = 500 * $70 = $35,000

->Total Cost = $5000 + $25000 = $30000

Profit = $35000 - $30000

= $5000

=> Per Unit Profit = $5000/500

= $10

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