1).warner tool company produces class rins to sell to collegeand high school stu
ID: 2457572 • Letter: 1
Question
1).warner tool company produces class rins to sell to collegeand high school students. These rings sell for $75.00 each, andcost $35 each to produce. Warner tool company has fixed costs of$50,000. a) calculate warner tool company's breakeven point? b) how much profit (loss) will warner tool company have if itsells 1,000 rings? 8,000? c) warner tools company's president, Dr. John Robinson expectsannual profit of $100,000. How many rings must be sold to attainthis profit? 1).warner tool company produces class rins to sell to collegeand high school students. These rings sell for $75.00 each, andcost $35 each to produce. Warner tool company has fixed costs of$50,000. a) calculate warner tool company's breakeven point? b) how much profit (loss) will warner tool company have if itsells 1,000 rings? 8,000? c) warner tools company's president, Dr. John Robinson expectsannual profit of $100,000. How many rings must be sold to attainthis profit?Explanation / Answer
a) Breakeven Point = Fixed Costs / (Revenue/unit - VariableCost/unit) Breakeven Point = 50000 / (75 - 35) BEP = 1250 Rings b)Profit is just a variation of the BEP equation. Rearrange theequation into this. Profit = (Quantity * (Revenue - VC)) - FC Profit = (1000 * (40)) - 50000 Loss = 40000 - 50000 = $-10,000 Profit = (Quantity * (Revenue - VC)) - FC Profit = (8000 * (40)) - 50000 Profit = $270,000 c) Quantity, if given profit/loss is just another variation ofthe BEP equation again. In here you are trying to determine howmany units you need to sell to cover your Fixed Costs + VariableCosts + Assumed Profit. Quantity = (Selling Price or Profit) + FC / (Revenue -Variable Costs) Quantity = 3750 Rings
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