Easy-Barrows, Inc., produces wheelbarrows. Its costs have been analyzed as follo

Question

Easy-Barrows, Inc., produces wheelbarrows. Its costs have been analyzed as follows:

VARIABLE COST

Materials $30/unit

Manufacturing labor 3 hours/unit (at $8/hour)

Assembly labor 1 hour/unit (at $8/hour)

Packing materials $3/unit

Packing labor 20 minutes/unit (at $6/hour)

Shipping cost $10/unit

FIXED COSTS

Overhead labor $50,000/year

Utilities $5,000/year

Plant operation $65,000/year

SELLING PRICE

$100/unit

Calculate the break-even quantity.

Calculate the break-even revenue.

Develop a chart to show profits at quantities of 2000, 4000, 6000, 8000, and 10000.

Explanation / Answer

Total Variable cost=$30+3*$8+1*$8+$3+20*$6/60+$10=$30+$24+$8+$3+$2+$10=$77

Selling Price=$100

Contribution=$100-$77=$23

Fixed cost=$50,000+$5,000+$65,000=$120,000

the break-even quantity=$120,000/$23=5,217.4 units

the break-even revenue=$120,000*$100/$23=$521,739

Particulars Amount in $ Quantity              2,000              4,000              6,000              8,000            10,000 Contribution Per unit                    23                    23                    23                    23                    23 Contribution            46,000            92,000        1,38,000        1,84,000        2,30,000 Less:fixed cost        1,20,000        1,20,000        1,20,000        1,20,000        1,20,000 Profit          -74,000          -28,000            18,000            64,000        1,10,000

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