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1. Bakery is making pies, which has a monthly fixed cost of $ 6000. Variable cost...

1. Bakery is making pies, which has a monthly fixed cost of $ 6000. Variable cost Will be $ 2.00 per pie and retail price will be $ 7.00 each.

a. How many pies must be sold per month in order to break even?

b. What would be the profit (loss) be if 1,000 pies are made and sold per month?

c. How many pies must be sold to realize a profit of $ 4000 per month?

2. Based on your promotion decided, develop your promotional material? Use any appropriate promotional media and marks awarded based on creativity

Business   Operations-Management   
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Homework Answers

Answer #1

1. A. BEQ = FIXED COST / PRICE PER UNIT - VARIABLE COST

FIXED COST = 6000
VARIABLE COST = 2
PRICE PER UNIT = 7

BREAK EVEN UNITS = 6000 / (7 - 2) = 1200

B. EXPECTED VOLUME = 1000

PROFIT = UNITS * CONTRIBUTION MARGIN - FIXED COST
PROFIT = (1000 * (7 - 2)) - 6000 = -1000

C. PROFIT = 4000

VOLUME = (PROFIT + FIXED COST) / CONTRIBUTION MARGIN
VOLUME = (4000 + 6000) / (7 - 2) = 2000

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