You are going to open a business making custom cabinets. You can sell each cabinet for $80. It takes a cabinetmaker approximately 45 minutes to make one cabinet. Each cabinetmaker works an 8-hour day earning $18 per hour. Each cabinet uses $25 in raw materials. You usually produce cabinets 20 days a month and can employ two cabinetmakers. You estimate that your fixed costs are $5,000 per month.
a. What is your contribution margin?
b. How many cabinets must you make each month to break even?
c. What is your total monthly revenue if you want to earn a $2,000 profit?
d. Construct a break-even chart for the custom cabinet firm.