Question

The manufacturer of a product that has a variable cost of $2.80 per unit and total fixed cost of $133,000 wants to determine the level of output necessary to avoid losses.

1. What level of sales is necessary to break-even if the product is sold for $4.85? Round your answer to the nearest whole number.

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   What will be the manufacturer’s profit or loss on the sales of 99,000 units? Round your answer to the nearest dollar.

   $  

2. If fixed costs rise to $169,000, what is the new level of sales necessary to break-even? Round your answer to the nearest whole number.

     units

3. If variable costs decline to $2.40 per unit, what is the new level of sales necessary to break-even? Round your answer to the nearest whole number.

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4. If fixed costs were to increase to $169,000, while variable costs declined to $2.40 per unit, what is the new break-even level of sales? Round your answer to the nearest whole number.

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5. If a major proportion of fixed costs were noncash (depreciation), would failure to achieve the break-even level of sales imply that the firm cannot pay its current obligations as they come due? Suppose $93,000 of the above fixed costs of $133,000 were depreciation expense. What level of sales would be the cash break-even level of sales? Use the initial variable cost in your calculations. Round your answer to the nearest whole number.

     units

Answer 1