Determine at what point businesses will profit or break

Question

Determine at what point businesses will profit or break even.

Complete the following problems:

1. Micromedia offers computer training seminars on a variety of topics. In the seminars each student works at a personal computer, practicing the particular activity that the instructor is presenting. Micromedia is currently planning a two-day seminar on the use of Microsoft Excel in statistical analysis. The projected fee for the seminar is $600 per student. The cost for the conference room, instructor compensation, lab assistants, and promotion is $9600. Micromedia rents computers for its seminars at a cost of $60 per computer per day.

1. Develop a model for the total cost to put on the seminar. Let x represent the number of students who enroll in the seminar.
2. Develop a model for the total profit if x students enroll in the seminar.
3. Micromedia has forecasted an enrollment of 30 students for the seminar. How much profit will be earned if its forecast is accurate?
4. Compute the breakeven point

 

2.  Eastman Publishing Company is considering publishing a paperback textbook on spread- sheet applications for business. The fixed cost of manuscript preparation, textbook design, and production setup is estimated to be $160,000. Variable production and material costs are estimated to be $6 per book. Demand over the life of the book is estimated to be 4000 copies. The publisher plans to sell the text to college and university bookstores for $46 each.

1. What is the breakeven point?
2. What profit or loss can be anticipated with a demand of 3500 copies?
3. With a demand of 3500 copies, what is the minimum price per copy that the publisher must charge to break even?
4. If the publisher believes that the price per copy could be increased to $50.95 and not affect the anticipated demand of 4000 copies, what action would you recommend? What profit or loss can be anticipated?

 

3. Preliminary plans are underway for construction of a new stadium for a major league base- ball team. City officials question the number and profitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected individuals may pur- chase a box for $300,000. The fixed construction cost for the upper-deck area is estimated to be $4,500,000, with a variable cost of $150,000 for each box constructed.

 

1. What is the breakeven point for the number of luxury boxes in the new stadium?
2. Preliminary drawings for the stadium show that space is available for the construction of up to 50 luxury boxes. Promoters indicate that buyers are available and that all 50 could be sold if constructed. What is your recommendation concerning the construction of luxury boxes? What profit is anticipated?

 

4. Financial Analysts, Inc., is an investment firm that manages stock portfolios for a number of clients. A new client has requested that the firm handle an $800,000 portfolio. As an ini- tial investment strategy, the client would like to restrict the portfolio to a mix of the fol- lowing two stocks:

Stock Price/Annual Share Estimated/Annual Return/Share

Oil Alaska Southwest $50 $6

Petroleum $30 $4

Let

x = number of shares of Oil Alaska

y = number of shares of Southwest Petroleum

 

References

Anderson, Sweeney, Williams, Camm, Cochran, Fry & Ohlmann (2010). Quantitative Methods for Business (12th ed.). Mason, Ohio: Cengage Learning.