# The manufacturer of a product that a variable cost of \$2.50 per unit and total fixed cost of \$125,000 wants to determine the level of output necessary to avoid losses.a. what level of sales is necessary to break, even if the product is sold for \$4.25? what will be the manufacturer's profit or loss on the sales of 1000,00 units?b.If fixed costs rise to \$175,000, what is the new level of sales necessary to break even?c.If variable cost decline to \$2.25 per unit, what is the new level of sales necessary to break even?d. If fixed cost were to increase to \$17,000, while variable cost declined to \$2.25 per unit, what is the new break-even level of sales?e. If a major proportion of fixed costs were noncahs (depreciation), would failure to achieve the break-even level of sales imply that the firm cannot pay its current obligation as they come due? Suppose \$100,000 of the above fixed cost \$125,000 werre depreciation expense. what level of sales would be the cash break-even level of sales?please can you give each detail.

Question
52 views

The manufacturer of a product that a variable cost of \$2.50 per unit and total fixed cost of \$125,000 wants to determine the level of output necessary to avoid losses.

a. what level of sales is necessary to break, even if the product is sold for \$4.25? what will be the manufacturer's profit or loss on the sales of 1000,00 units?

b.If fixed costs rise to \$175,000, what is the new level of sales necessary to break even?

c.If variable cost decline to \$2.25 per unit, what is the new level of sales necessary to break even?

d. If fixed cost were to increase to \$17,000, while variable cost declined to \$2.25 per unit, what is the new break-even level of sales?

e. If a major proportion of fixed costs were noncahs (depreciation), would failure to achieve the break-even level of sales imply that the firm cannot pay its current obligation as they come due? Suppose \$100,000 of the above fixed cost \$125,000 werre depreciation expense. what level of sales would be the cash break-even level of sales?

please can you give each detail.

check_circle

star
star
star
star
star
1 Rating
Step 1

The manufacturer of a product that a variable cost of \$2.50 per unit and total fixed cost of \$125,000 wants to determine the level of output necessary to avoid losses.

a. what level of sales is necessary to break, even if the product is sold for \$4.25? what will be the manufacturer's profit or loss on the sales of 1000,00 units?

TR (\$) = 4.25Q

TC(\$) = 125,000 + 2.5Q

Let Q* be the level of sales required to avoid losses, ie. to break even. Then at the break even point,

TR = TC

Or, 4.25Q* = 125,000 + 2.50Q*

Hence, Q* = 125,000 / (4.25 - 2.50) = 71,429 units

The manufacturer's profit or loss on the sales of 1000,00 units = TR - TC =  4.25Q - (125,000 + 2.50Q) = 4.25 x 100,000 - (125,000 + 2.50 x 100,000) = \$ 50,000

Step 2

b.If fixed costs rise to \$175,000, what is the new level of sales necessary to break even?

TC (\$) now changes to: 175,000 + 2.50Q

If Q* is the break even sales volume then, at break even point

TR = TC

Or, 4.25Q* = 175,000 + 2.50Q*

Hence, Q* = 175,000 / (4.25 - 2.50) = 100,000 units.

Step 3

c.If variable cost decline to \$2.25 per unit, what is the new level of sales necessary to break even?

TC(\$) = 125,000 + 2.25Q

Let Q* be the level of sales required to avoid losses, i...

### Want to see the full answer?

See Solution

#### Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in 