Question

Novelties, Inc. produces and sells highly faddish products directed toward the pre-teen     market. A new product has come onto the market that the company is anxious to produce and sell. Novelties plans to produce 30,000 units each month. Variable costs to manufacture and sell one unit would be $1.60 and fixed costs would total $45,000 per                         month. Novelties, Inc. plans to sell this new product for $2.50 per unit.

                a.         Calculate the break-even point in both units and sales dollars. What will be your advice to Novelties, Inc.?

            b.         Calculate the number of units that must be sold each month to earn a monthly net income of $9,000.

            c.         Create a spreadsheet solution to the problem.

Answer 1