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Question - James is a carpenter and he builds shelves for cupboards and sells them to several hardware shops - the maximum production possible is 500 shelves per year. Sales for the next year are expected to be 350 units and the selling price of each shelf is $250.
Fixed costs are estimated at $24,000 per year and the cost of making each shelf is calculated as follows:
Material costs $55
Labour costs $45 (1.5 hrs @$30 per hr)
Required -
1. Calculate the breakeven point per year (in units).
2. Calculate the maximum possible profit per year.
3. Calculate the target sales in dollars if the target profit is $15,000 for the year.
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