Question

Indiana Company produces couches. The fixed monthly cost of production is $8,000, and the variable cost per unit is $65. The couches sell for $180 apiece. Answer these questions: 3 points each 1) For a monthly volume of 300 tables, determine the total cost, total revenue, and profit. 2) Determine the monthly break-even volume for Indiana Company.

Answer 1

Answer: See explanation

Step-by-step explanation:

1) For a monthly volume of 300 tables, determine the total cost, total revenue, and profit.

Fixed monthly cost = $8000

Variable cost per unit = $65

Selling price = $180 each

Monthly volume = 300

Therefore, the total cost will be

= $8000 + ($65 × 300)

= $8000 + $19500

= $27500

The total revenue will then be:

= Price × Quantity

= $180 * 300 units

= $54000

Total profit will be:

= Sales revenue - Cost

= $54000 - $27500

= $26500

b) Break even volume simply means the volume whereby no profit or loss is incurred. This will be:

= $8000 / ($180 - $65)

= $8000 / $115

= 69.56 units

= 70 units