Homework Answers
Total variable cost = $47 + $3 = $50
Total fixed cost = $78,000 + $42,000 = $120,000
a.
Breakeven point in units = Fixed cost / (Selling price per unit - Variable cost per unit)
= $120,000 / ($65 - $50)
= 8,000 units
b.
Let selling price per unit be S.
Breakeven point in units = Fixed cost / (Selling price per unit - Variable cost per unit)
10,000 = $120,000 / (S - $50)
S = $62
Selling price per unit is $62.
c.
Net profit = [Units sold - (Selling price per unit - Variable cost per unit)] - Fixed cost
= [12,000 - ($66 - $50)] - $120,000
= $72,000
Company can spend $72,000 on advertising.
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