Question

The SAM's Publishing Company intends to publish a textbook in Operations Management. Fixed costs are   ...

The SAM's Publishing Company intends to publish a textbook in Operations Management. Fixed costs are    $20,000 per year, variable cost per unit is 50 percent of their $20 per-unit selling price. Give your answers

   about the following questions.

___ 7. If annual sales are 3,000 units, what are the annual profits?

   a. $10,000        b. $20,000        c. $30,000        d. $40,000        e. None

___ 8. What variable cost per unit would result in $30,000 annual profits if annual sales are 4,000 units?

   a. $7.00       b. $7.50        c. $8.00        d. $8.50        e. None

___ 9 How much annual revenue is required to breakeven ?

   a. 20,000       b. 30,000          c. 40,000          d. 50,000       e. None

___10. What price must book be sold for to obtain a yearly profit of $30,000, assuming that estimated demand would be realized at the break-even ?

a. $10        b. $30        c. $35        d. $40        e. None

Business   Operations-Management   
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Homework Answers

Answer #1

7)   a. $10,000

Annual profits = Annual sales * (Selling price - Variable cost) - Fixed cost = 3000*(20-20*0.5) - 20000 = $ 10,000

8)   b. $7.50

Variable cost = Selling price - (Profit + Fixed cost)/Annual sales = 20 - (30000+20000)/4000 = 7.5

9)   c. 40,000   

Break-even revenue = Selling price * Fixed cost / (Selling price - Variable cost) = 20*20000/(20-10) = 40000

10)   c. $35   

Break-even volume = F/(S-C) = 20000/(20-10) = 2000

Target Selling price, S = (Profit+Fixed cost)/Annual Sales + Variable cost = (30000+20000)/2000 + 10 = 35

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