Problem 1: Fu's firm has the capacity to produce a maximum of 6000 items per annum. The fixed costs are $385,500 per annum, variable costs are $5 per item, and he sells each item for $80.
Required:
a. Calculate the break-even volume, break-even revenue, and break-even as a percent of capacity per annum.
b. If he produced and sold 5100 items in a year, what was the profit made or loss incurred?
c. What is the maximum profit per year that he can expect from his firm?
Problem 2: Sandra's company has a machine that can produce a maximum of 50,000 components per annum. She sells each component for $3.50. The fixed costs are $36,000 per annum and variable costs are $0.35 per component.
Required:
a. Calculate the break-even volume, break-even revenue, and break-even as a percent of capacity per annum.
b. If she produced and sold 13,500 components in a year, what was the profit made or loss incurred?
c. What is the maximum profit per year that she can expect from her company?
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