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5. A company sells dehumidifiers for $130.00 per unit. The variable cost per unit is expected...

5. A company sells dehumidifiers for $130.00 per unit. The variable cost per unit is expected to be $78.00 and monthly fixed costs are $2860.00. Current capacity is 75 units per month. Answer the following independent questions. Show Caculation by BAII plus caculator.. You are encouraged to draw the timelines for yourself to help you with setting up the logic of how to solve the problem.

a) How many dehumidifiers have to be sold per month to breakeven?

b) The company hires another worker to keep up with demand and can now produce 513 dehumidifiers per month. Variable costs per unit remain the same but monthly fixed costs increase by 15%. If the unit sale price is increased to $136 per dehumidifier and production is at the new monthly maximum capacity, what is the highest amount of income the company could receive in a month?

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Homework Answers

Answer #1

a)

Break Even = Fixed Cost/Contribution per unit = 2860/(130-78) = 55 units

b)

Note: The word "Income" means Revenue i.e. Sales. However, it might also be Profit. Although, Taking it as Profit is more appropriate, Answer is given for both assumptions.

Highest Income(Revenue or Sales) = Maximum Capacity*Sales Price = 513*136 = $69768

Highest Income(Profit) = [(Selling Price per unit-Variable Cost per unit)*Maximum Capacity]-Fixed Cost = [(136-78)*513]-[2860+15%] = 29754-3289 = $26465

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