Question :
Consider that a commercial airplane manufacturing company's annual fixed costs for the widebody passenger jet are $1,425 million, and its variable cost per airplane is $90 million. The price for a 240-passenger plane with a range up to 4,010 miles is about $105 million per plane.
Evaluate the company's break-even point in number of widebody passenger jets and in dollars of sales.
Suppose the company plans to sell 99 widebody passenger jets in 2012. Compute the company's projected operating profit.
Consider the company increased its fixed costs by $126 million and reduced variable costs per airplane by $4 million. Evaluate its operating profit if 99 widebody passenger jets are sold. Determine the break-even point. Comment on your results.
3. Assume fixed costs do not change, but variable costs increase by 5% before deliveries of widebody passenger jets starts in 2012. Evaluate the new break-even point. What strategies might the company use to assist assure profitable operations in light of increases in variable cost?