The manufacturer of a product that has a variable cost of

Reference no: EM13482358

The manufacturer of a product that has a variable cost of $2.50 perunit and total fixed cost of $125,000 wants to determine the level of output necessary to avoid losses.

a. What level of sales is necessary to break even if the product issold for $4.25? What will be the manufacturer's profit or loss on the sales of 100,000units?

b. If fixed costs rise to $175,000, what is the new level of salesnecessary to break even?

c. If variable costs decline to $2.25 per unit, what is the newlevel of sales necessary to break even?

d. If fixed costs were to increase to $175,000, while variablecosts declined to $2.25 per unit, what is the new break-even level of sales?

e. If a major proportion of fixed costs were non cash(depreciation), would failure to achieve the break-even leve ofsales imply that the firm cannot pay its current obligations asthey come due? suppose $100,000 of the above fixed costs of$125,000 were depreciation expense. What level of sales would bethe cash break-even level of sales?

Reference no: EM13482358

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