A plant operation has fixed costs of $1,000,000 per year, and its output capacity is 100,000...
A plant operation has fixed costs of $1,000,000 per year, and its output capacity is 100,000 electrical appliances per year. The variable cost is $40 per unit, and the product sells for $65 per unit.
a. Construct the economic breakeven chart.
b. Compare annual profit when the plant is operating at 85% of capacity with the plant operation at 100% capacity. Assume that the first 85% of capacity output is sold at $65 per unit and that the remaining 15% of production is sold at $45 per unit.
a. Use the line drawing tool to plot the lines that represent the Fixed Cost, Total Revenue, and Total Costs. Be sure to properly label your lines.
Use the point drawing tool to plot the Breakeven point. Be sure to properly label the point.
Homework Answers
a) D = 1,000,000 / ($65 - $40) = 40,000 Units per year
Enclosed graph
b) Profit (Loss) = Total Revenue ・ Total Cost
(85%) Capacity) = [85,000 * $65] - [1,000,000 + (85,000 * $40)] = 1,125,000
(100%) Capacity) = [85,000 * $65 + 15,000 * $45] - [1,000,000 + (100,000 * $40)] = 1,200,000
![C$2,000,000- 40, 000 Units per year P-v (S65-S40) 000 a) D = 5000.000 T $4,000,000 3,000,000 $2,000,000 Loss 1,000,000 Total Revenue Profit Breakeven Point Total Cost Fixed Cost D 40.000 units 0 20,000 40,000 0,000 8,000 00,000 Number of Units b) Profit (Loss) = Total Revenue-Total Cost (85%) Capacity)- [85,000 * $65] - [1,000,000 + (85,000 * $40)] -1,125,000 (100%) Capacity) = [85,000 * $65 + 15,000 * $45]-[ 1,000,000 + (100,000 * $40-1,200,000](http://img.homeworklib.com/questions/f8e43e70-71c8-11ea-bcc7-edf3ad10fbc8.png?x-oss-process=image/resize,w_560)
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