A factory with capacity of 700,000 units per year operates at 62% capacity. The annual income...
A factory with capacity of 700,000 units per year operates at 62% capacity. The annual income is $430,000.00. Annual fixed costs are $190,000.00 and the variable costs are $0.348 per unit.
a) What is the current loss or profit?
b) What is the breakeven point?
Homework Answers
Answer
a)
Profit = Total Revenue - Total Cost
$430,000
Total Cost = fixed Cost + Variable Cost
Variable Cost = 0.348*Q and Q = 62% of 700,000 = 0.62*700,000 = 434,000
=> 0.348*434000 = $151032
Total Cost = 190,000 + 151032 = 341032
Hence Profit = 430,000 - 341032 = 88968
b)
AS they sold 43400 and earned income = 430,000.
Hence Per unit price = 430,000/434000 = 0.991
In order to be breakeven
Total Cost = Total Revenue
=>0.991Q = 0.348Q + 190000
=> Q = 295490
Hence In order to be breakeven they should produce 295490 units
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