BUS 104 Intro to Business _ Break Even Analysis Problems - Solutions

Break even Analysis Q1. The Willow Furniture Company produces tables. The fixed monthly cost of production is $8000, and the variable cost per table is $65. The tables sell for $180 a piece. a. For a monthly volume of 300 tables, determine the total cost, total revenue, and profit. b. Determine the break-even volume for the Willow Furniture Company. Q2. Problem 19 Page 17 A Website has a fixed cost $15,000 per day. The revenue is $0.06 each time the Website is accessed. The Variable Cost of responding to each hit is $0.02. (a) How many times much this Website be accessed each day to break even? (b) What is the break-even-point in dollars? Q3. The General Store at State University is an auxiliary bookstore located near the dormitories that sells academic supplies, toiletries, sweatshirts and T-Shirts, magazines, packaged food items, and canned soft drinks and fruit drinks. The manager of the store has noticed that several pizza delivery services near campus make frequent deliveries. The manager is therefore considering selling pizza at the store. She could buy premade frozen pizzas and heat them in an oven. The cost of the oven and freezer would be $27000. The frozen pizza cost $3.75 each to buy from a distributor and to prepare (including labor and a box). To be competitive with the local delivery services, the manager believes she should sell the pizzas for $8.95 a piece. The manager needs to write up a proposal for the university’s director of auxiliary services. a. Determine how many pizzas would have to be sold to break even. b. If the General Store sells 20 pizzas per day, how many days would it take to break even? c. The manager of the store anticipates that once local pizza delivery service starts losing business, they will react by cutting prices. If after a month ( 30 days) the manager has to lower the price of a pizza to $7.95 to keep demand at 20 pizzas per day, as she expects, what will the new break even quantity be, and how long will it take the store to break even?