Question

a producer of pottery is considering the addition of a new plant to absorb the backlog of demand that now exists. the primary location being considered will have fixed costs of $10,000 per month and variable cost of 77 cents per unit produced. each item is sold to retailers at a price that averages 98 cents. what volume is needed to provide a profit of $25,000 per month? (round your answer to a whole number.)

Answer 1

To achieve a monthly profit of $25,000, the pottery producer must sell approximately 166,667 units, considering their fixed costs and variable costs per unit.

Step-by-step explanation:

To solve for the volume needed to provide a profit of $25,000 per month, we need to understand the relationship between fixed costs, variable costs, the selling price of the items, and the desired profit. The fixed cost is $10,000 per month and the variable cost is $0.77 per unit. Each item is sold at $0.98.

To calculate the volume required, we use the formula for profit: Profit = (Selling Price per Unit - Variable Cost per Unit) × Volume - Fixed Costs. In this case, the profit per unit is $0.98 - $0.77 = $0.21. We need a profit of $25,000 plus the fixed costs of $10,000, so we calculate the required volume as follows: ($25,000 + $10,000) / $0.21, which equals 166,667. Therefore, the pottery producer needs to sell approximately 166,667 units to achieve the desired profit. Since we need to round to a whole number, the precise answer is 166,667 units.