1. Microsoft is developing a new program and they want to identify the "break-even" point.
Their fixed cost is $72,000 while their variable costs per program are $8. They plan to sell this program for $20.00 each. What is the break-even point?
2. Gina Fox has started her own company, Foxy Shirts, which manufactures imprinted shirts for special occasions. Since she has just begun this operation, she rents the equipment from a local printing ship when necessary. The cost of using the equipment is $350. The materials used in one shirt cost $8, and Gina can sell these for $15 each.
a. If Gina sells 20 shirts, what will her total revenue be? What will her total variable cost be?
b. How many shirts must Gina sell to break even? What is the total revenue for this?
3. Ross White's machine shop uses 2,500 brackets during the course of a year. These brackets are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost per bracket per year is $1.50 (or 10% of the unit cost) and the ordering cost per order is $18.75. There are 250 working days per year.
a. What is the EOQ?
b. In minimizing cost, how many orders would be made each year?
c. What is the time between orders?
4. What is the 68-95-99.7% rule?