Question

AQ1
Data	Units [x]	Cost [C]	Rev [R]	Profit [P]
	10	65500	4300	-61200
	20	71500	8600	-62900
	50	89500	21500	-68000
	80	107500	34400	-73100
	100	119500	43000	-76500
	120	131500	51600	-79900
	130	137500	55900	-81600

You have been asked to take over management of a product line by your Division Manager. Your Cost model for this product line is C = 600(x) + 59,500, where “x” represents units produced during a particular sales period and “C” represents total Costs. Upon assuming product line responsibility, you note that the price “p” of $430 per unit set by your predecessor for the past few sales periods resulted in a Revenue model of R = (p)(x) = 430(x). Provide brief answers in the space provided to parts "a" and "b" below.

a. Based on the information available, speculate on why your predecessor is no longer managing this product line.

b. If your market research department reports no limiting production or market constraints on "x", what is the minimum price “p” you would want to set in order to eventually "break even"?

Answer 1

a. Based on the information available the predecessor is not managing the product line because the product line is running in losses because the variable cost is $600 per unit and the fixed cost is $59500/- and the price of the product is $ 430 so the product line is in losses4.

b. The calculation of price of the the product at breakeven point is:

The fixed cost is 59500 and the variable cost of the Product is 600. Here the minimum price of the product should be $600. In this we cannot say the breakeven point because the price of the per unit and the sales amount not avaialble.