Question 1. See Clear Optics is considering producing a new line of eyewear. After considering the costs of raw materials and the cost of some new equipment, the company estimates fixed costs to be 40,000 with a variable cost of $45 per unit produced.
a. If the selling price of each new product is set at $100, how many units need to be produced and sold to break even? Use both the graphical and algebraic approaches.
b. If the selling price of the product is set at $80 per unit, See-Clear expects to sell 2000 units. What would be the total contribution to profit from this product at this price?
c. See-Clear estimates that if it offers the product at the original target price of $100 per unit, the company will sell about 1500 units. Will the pricing strategy of $100 per unit or $80 per unit yield a higher contribution to profit?
Question 2. Med-First is a medical facility that offers outpatient medical services. The facility is considering offering an additional service, mammography-screening test, on-site. The facility estimates the annual fixed cost of the equipment and skills necessary for the service to be $120,000. Variable costs for each patient processed are estimated at $35 per patient. If the clinic plans to charge $55 for each screening test, how many patients must it process a year in order to break even?