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4. A manufacturer plans to produce a new type of T-tool. The variable cost per unit...

4. A manufacturer plans to produce a new type of T-tool. The variable cost per unit is expected to be $78.00 and monthly fixed costs are $2860.00. The unit selling price will be $130.00. Current manufacturing capacity is 75 units per month. Answer the following independent questions.

a)How many T-tools have to be sold per month to breakeven?

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

*Please use financial calculator method and show the values being entered for PY, CY, I, N, PMT, FV, PV along with your final answer*

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Answer #1

*Using financial calculator method is not applicable as we only need to make accounting calculations.

a) Breakeven units are calculated as follows:

b) Fixed cost remain the same. Now higher the company sells higher is profit so lets calculate the profit at maximium capacity:

Reducing units by every unit reduces profits, so this is the highest level of profit.

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