Evergreen Fertilizer Company produces fertilizer. The company\'s fixed monthly c

Question

Evergreen Fertilizer Company produces fertilizer. The company's fixed monthly cost is $25000 and its variable cost per pound of fertilizer is 0.15. Evergreen sells the fertilizer for S0A0 per pound. Determine the following: Use analytical method and determine the break even volume for the company If price increases from $0.4 to $0.8 in steps of 0.1 what effect will these changes have on the break even volume? (Assume only price changes while other parameters remain the same) If the variable cost increases from $0.0.15 to $0.25 in steps of 0.05 what are the new break even volume? (Assume only variable cost changes while other parameters remain the same) If the company incurs an advertising expenditure of$140000 per year, what effect will the change have on the break even volume? If the company sells 120,000 pounds, what will be the profits/losses? If the company wants to earn a profit of$120,000 how much fertilizer should the company sell?

Explanation / Answer

a) break even volume = fixed cost / ( selling price per pound - variable cost per pound)

= 25000/( 0.40-0.15) = 100,000 pounds

b)   break even volume = fixed cost / ( selling price per pound - variable cost per pound)

= 25000/ (0.80-0.15) =384,641.5pounds

c)   break even volume = fixed cost / ( selling price per pound - variable cost per pound)

= 25000/( 0.40-0.25) =166,666.6 pounds

d) break even volume = fixed cost / ( selling price per pound - variable cost per pound)

= 140000/(0.40-0.15) =560,0000 pounds

e) company sells 120,0000 pounds

we have got break even volume =100,000 pounds

so we have profit/losses = 20,000 pounds

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