The manufacturer of a product that has a variable cost of $2.50 per unit and total fixed cost of $125,000 wants to determine the level of output necessary to avoid losses.
a.) What level of sales is necessary to break even if the product is sold for $4.25? What will be the manufacturer's profit or loss on the sales of 100,000 units? b.) If fixed costs rise to $175,000, what is the new level of sales necessary to break even? c.) If variable costs decline to $2.25 per unit, what is the new level of sales necessary to break even? d.) If fixed costs were to increase to $175,000 while variable costs declined to $2.25 per unit, what is the new break-even level of sales? e.) If a major proportion of fixed costs were noncash (depreciation), would failure to achieve the break-even level of sales imply that the firm cannot pay its current obligations as they come due? Suppose $100,000 of the above fixed costs of $125,000 were depreciation expense. What level of sales would be the cash break-even level of sales?