Q1. The Chocolate Factory’s fixed costs are $1.5 million annually. The main prod
ID: 1205272 • Letter: Q
Question
Q1. The Chocolate Factory’s fixed costs are $1.5 million annually. The main product (The Deluxe Chocolate Box) has revenues of $10.00 per unit and $4.00 variable cost. Based on this information, the general operations manager knows that the breakeven quantity point per year is:
a. 250,000 units
b. 200,000 units
c. 150,000 units
d. 107,142 units
Q2. Based on the data provided in Question 13. The total profits or loss if the factory produces 350,000 units is:
a. Loss of $2,000,000
b. Profit of $600,000
c. Profit of $3,400,000
d. Loss of $600,000
Explanation / Answer
(Q1) (a)
Breakeven point = Fixed cost / (Selling price - Unit variable cost) = $1.5 million / $(10 - 4)
= $1.5 million / $6 = 250,000 units
(Q2) (b)
Profit = Revenue - Fixed cost - Variable cost = (P x Q) - F - (V x Q) [P: Price, V: Variable cost]
= Q x (P - V) - FC = 350,000 x $6 - $1,500,000 = $(2,100,000 - 1,500,000) = $600,000
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