Reference no: EM132004454

My question: Develop a break-even capacity analysis for Exit"s new door and determine the following: Best price, production rate, and profit.

Price-Demand Chart

Average Sales Price Area Sales

(price/per door (in units)

$90 40,000

$103 38,000

$115 31,000

$135 22,000

FIXED COSTS:

The capital cost for the factory was expected to be $14 million.   

Depreciation was based on a 30-year straight-line method a $4m. salvage value.        Fixed Cost $ 333,333

Annual maintenance expenses were projected to total 5 percent of capital.   Fixed Cost     $ 700,000

Fuel and utility costs were expected to be $500,000 per year.          Fixed Cost $ 500,000

Supervisory, clerical, technical, and managerial salaries Fixed Cost $ 350,000

Taxes and insurance Fixed Cost $ 200,000

Misc. expenses Fixed Cost $ 250,000

Total Fixed Costs $ 2,333,333

VARIABLE COSTS:

Labor wage rate of $10 per hour *1.5 hours. per door   15.00

Fringe benefits paid to the operating labor is 15% of labor costs per door 2.25

Sheet metal, Styrofoam, adhesive for the doors, and frames were projected to cost per door   12.00

Paint, hinges, doorknobs, and accessories were estimated to total per door     7.80

Crating and shipping supplies were expected to cost per door     2.50

TOTAL VARIABLE COSTS $39.55