Stephins Inc. wants to determine the minimum dollar volume and unit volume
needed at its new facility. The firm first determines that it has fixed costs of
$10,000 this period. Direct labor is $1.50 per unit and material is $0.75 per unit.
The selling price is $4 per unit. Determine the breakeven point in dollars and
units.
Total fixed cost
Hint : Breakeven in units =
Price - variable cost
Total fixed cost
Breakeven in dollars =
Variable cost
1-
Price
Solution:
a) Breakeven in dollars
V = 1.50 + 0.75
V = 2.25 (variable cost)
Total fixed cost
Breakeven in dollars =
Variable cost
1-
Price
10000
Breakeven in dollars = = $22,857.14
2.25
1-
4.0
b) Breakeven in units
Total fixed cost
Breakeven in units =
Price - variable cost
10000
Breakeven in units = = $5,714.29
4 - 2.25
, Refresher - MATHEMATICS Quiz 24
PROBLEM 2:
Sara James Bakery has a plant for processing Delux breakfast rolls and wants to
better understand its capability. Last week, the facility produced 148,000 rolls.
The effective capacity is 175,000 rolls. The production line operates 7 days per
week, with 8-hour shifts per day. The line was designed to process the nut-filled,
cinammon flavored Delux roll at a rate of 1,200 per hour. Determine the following:
➀ Capacity for this plant when producing this Delux roll
➁ Utilization for this plant when producing this Delux roll
➂ Efficiency for this plant when producing this Delux roll
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