The Global Sports Center is contemplating producing a new pair of mountain climb

Question

The Global Sports Center is contemplating producing a new pair of mountain climbing boots that would sell for $150 per pair. The per-unit variable cost is $80 and the fixed cost per year allocated to this product is $70,000. The manager estimates that annual sales of this product would have a mean of 10,000 units with a standard deviation of 2,000 units. a) What is the breakeven point? b) What is the probability of at least breaking even? c) What volume must be sold to obtain a profit of $500,000? d) What is the profit when 12,000 pairs are sold? e) If the company has decided to produce the boots if the probability of a profit of $500,000 or more is 50% or higher, what should they do? Base your answer on a probability.

Explanation / Answer

a)Sales price per unit = $150 variable cost per unit = $80 Total fixed expenses = $70,000 Sales = Variable expenses + Fixed expenses + Profit $150Q* = $80Q* + $70,000 $70Q = $70,000 Q = $70,000 /$70 Q = 1000 Units b) probablity ofatlest breaking even is 1000/10000 = 1/10= 0.1 c)500,000/150 = 3334 units d)when 12,000 pairs are sold is 1,800,000-70,000 e)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.