Question

*Farris Billiard Supply sells all types of billiard equipment, and is considering manufacturing their own brand of pool cues. Mysti Farris, the production manager, is currently investigating the production of a standard house pool cue that should be very popular. Upon analyzing the costs, Mysti determines that the materials and labor cost for each cue is $25, and the fixed cost that must be covered is $2,400 per week.

1.If Mysti sells 20 units at a price of $40 each, her total revenue will be ___800?______.

2.If Mysti sells 20 cues, her total variable cost will be ___500?______.

3. Break even point? ____160?____

4.Based on the calculation in the previous question, Mysti's total revenue at the breakeven point of output is ___?____

Answer 1

1. Number of units sold = 20

Price per unit = $40

Total revenue = Number of units sold * Price per unit = 20 * $40 = $800

Total revenue = $800

2. Variable cost for each cue is $25.

Number of cues sold = 20

Variable cost of 20 cues = 20 * $25 = $500

Variable cost of 20 cues = $500

3. Break-even point is calculated by the formula:

BEP = Fixed Cost / (Selling Price per unit - Variable Cost per unit)

Fixed cost =$2400

Selling Price per unit = $40

Variable cost per unit = $500 / 20 = $25

4 BEP = $2400 / ($40 - $25)

BEP = $2400/ $15

BEP = 160units

Break even point will be reached when Farris Billiard will sell 160 units.