Determine monthly break-even in number of units and revenue

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Reference no: EM133638160

Assignment: Managerial Decision Making

Question I. Magic Nelson owns a Mug Printing Company. He forecasts demand for his Mugs at 5500 for next year. He charges $19 per Mug sold. It costs him $40,000 in fixed costs a year to run his business and $2.25 per Mug in variable costs.

1. What are Magic's revenues?

2. What are Magic's costs?

3. Does Magic make a profit?

4. Construct break-even line graph (Cost, Revenue, Profit) using X values from zero to 3000 at increment of 100 units.

Question II. The CompuTex company manufactures home Security System. The company's fixed monthly cost is $49,000, and its variable cost per Security System is $495. The company sells the Security System for $1020.

1. Determine the monthly break-even in number of units and revenue.

2. Construct a break-even graph (Cost, Revenue, profit) using X values from 0 to 200 at increment of 10 units in Excel.

Question III. The MediaTex company is going to present a new Smart Speaker in JRB Convention Center. In this event, MediaTex will present a seminar with a lunch break. The Convention Center Hall capacity is 550 people. The cost of renting the place is $6,500/day. The cost of the food and drinks is $5.75 per person. The company knows that 50% of the audience buys its product from the past events, which is priced at $55. Is JRB Convention Center a profitable place to do this kind of campaign? Assume full capacity of 550.

Question IV. The MediaTex company has noticed when it advertises, it dramatically increases the number of customers who buy its product at seminars. With advertising, MediaTex expects the attendees to buy their product at a price of $79. The cost of renting a place is $3900/day. The cost of food and drinks is $5.75 per person (assume full capacity of 550). If MediaTex assumes at a minimum it will sell 125 units, what would be the upper bound on advertising dollars (i.e., where would the company break even?).

Question V. Consider the following locations and their fixed and variable costs.

Location	Fixed Cost per Year	Variable Cost per Unit
USA	$1,000,000	$25
Mexico	$500,000	$40
Canada	$1,600,000	$15
Panama	$700,000	$30
China	$600,000	$42

1. Use cross-over analysis to find the range of production that yields minimum total production cost for each location.

2. Construct linear line graph for all locations for X values from 0 to 150,000 at increment of 5000 units.

3. If the units are sold at price of $100, which location yields highest profit at production volume of 110,000 units?

4. For part 3, construct a break-even graph (cost, revenue, profit) using X values of 0 to 150,000 at increment of 5,000 units.

Reference no: EM133638160

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