Question

Note: When entering answers in Blackboard, be sure to enter number of units as integers; always round up units if they are not integers, costs/revenues/profits should be entered using two decimal places; losses should be entered as negative numbers. Be sure to format your cells in the Excel file to show two decimal places to determine if the value is an integer or not. M1 IND1. A firm is currently manufacturing and selling a product using Process X that has a variable cost of $22.75 per unit and a selling price of $34.95 per unit. Fixed costs are $21,500. Current sales volume is 6,500 units. The firm can substantially improve the product quality by changing to Process which would increase the fixed cost by $14,000. Variable costs would increase to $25.65 per unit, but the volume is expected to increase to 9,200 units due to the higher quality of the product. a) Based on Process X: What is profit when selling 6,500 units b) Based on Process Y: What is profit when selling 9,200 units? c) Based on your profit calculations-should the company change to Process Y? d) How many units would the company have to sell with the Process Y to generate a profit of at least $40,000? MI-IND2. An online self-publishing company estimates that the fixed costs of its first major project will be $41,800, the variable cost will be $18 per book, and the selling price per book will be $23.50 How many books must be sold to break even? What is the total revenue at the break-even point? If the editors take a total of $35,200 in salary (what cost is affected?)-how many books must be sold to break even? What is the total revenue for the break-even volume when the publishers take a total of $35,200 in salary? a) b) c) d)

Answer 1