Reference no: EM132761188

Question - In the upcoming year, Gerry plans to sell each of his winter coats for $200 and he believes he can manufacture a maximum of 5,500 a year.

For every 20 coats he makes, Gerry calculates that his materials will cost him as follows: $800 for outer shells; $1,000 for insulation; $500 for linings; $300 zippers, buttons and labels.

Gerry's manufacturing facility is leased for $50,000 annually, plus a $150 monthly machine maintenance fee. He also pays $600 property + liability insurance every six months.

On graph paper (on Page 3 or similar), build a MONTHLY break-even analysis chart, being sure to:

1. Calculate (and show your calculations for) the Break-Even Point: a. In units b. In sales dollars c. As a percentage of capacity

2. Name and label the x and y axes appropriately.

3. Chart and label the fixed cost function, the total cost function and the total revenue function.

4. Indicate the variable cost area.

5. Plot the break-even volume amount line and the break-even sales amount line.

6. Indicate the break-even point.

7. Indicate the area of loss and the area of profit.