Question

A camera manufacturer spends $1650 each day for overhead expenses plus $5 per camera for labor and materials. The cameras sell for $8 each. How many cameras must the company sell in one day to equal its daily costs? If the manufacturer can increase production by 50 cameras per day, what would their daily profit be?

Answer 1

The camera company must sell 550 cameras to break even. If the manufacturer increases production by 50 cameras per day, the daily profit would be $150.

Step-by-step explanation:

To find out how many cameras the company must sell to equal its daily costs, we first set up the equation where the total costs equal the total revenue.

The total cost (TC) each day includes a fixed overhead expense of $1650 and variable costs of $5 per camera.

The total revenue (TR) is the number of cameras multiplied by the selling price of $8 per camera.

So, the equation to break even is $1650 + $5x = $8x, where x represents the number of cameras sold.

By solving the equation for x, we subtract $5x from both sides to get $1650 = $3x and then divide both sides by $3 to find x. Thus, x = $1650 / $3 = 550 cameras.

This is the break-even point where the total cost equals total revenue.

Regarding the additional production of 50 cameras, the new profit can be found by first calculating the additional revenue, which is 50 cameras * $8 = $400.

Since the cost per camera is the same, the additional cost is 50 cameras * $5 = $250.

Hence, the new daily profit after increasing production by 50 cameras would be $400 (additional revenue) - $250 (additional cost) = $150 in profit per day.