Assignment
Answer 5 Problems. Include questions in black and answers in red.
I. Ray Bond sells handcrafted yard decorations at county fairs. The variable cost to make these is $20 each, and he sells them for $50. The cost to rent a booth at the fair is $150. How many of these must Ray sell to break even?
II. Ray Bond, from Problem I, is trying to find a new supplier that will reduce his variable cost of production to $15 per unit. If he was able to succeed in reducing this cost, what would the break-even point be?
III. Farris Billiard Supply sells all types of billiard equipment and is considering manufacturing its own brand of pool cues. Mysti Farris, the production manager, is currently investigating the production of a standard house pool cue that should be very popular. Upon analyzing the costs, Mysti determines that the materials and labor cost for each cue is $25 and the fixed cost that must be covered is $2,400 per week. With a selling price of $40 each, how many pool cues must be sold to break even? What would the total revenue be at this break-even point?
IV. Mysti Farris (see Problem III) is considering raising the selling price of each cue to $50 instead of $40. If this is done while the costs remain the same, what would the new break-even point be? What would the total revenue be at this break-even point?
V. Mysti Farris (see Problem III) believes that there is a high probability that 120 pool cues can be sold if the selling price is appropriately set. What selling price would cause the break-even point to be 120?