Nancy\'s Novelty Notebooks has forecast next year\'s demand to be 33,000. The no

Question

Nancy's Novelty Notebooks has forecast next year's demand to be 33,000. The notebooks are considered to incur annual fixed costs of $27,000 and per-unit variable costs of 25 cents. a. If notebooks can be sold for $2 each, what is the break-even quantity?. (Round your answer to the next whole number.) BEP units b. If we assume that the forecast is correct, what should be the per-unit price of notebooks, if the company seeks to earn an annual profit of $11,000? Hint: solve for revenue (R). (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Price

Explanation / Answer

1. Qbep = Fixed Cost / (REV - Variable Cost )

FC = $27,00

REV = $2

VC = $0.25

Qbep = 27000 / (2 - 0.25)

= 15,428.5 or 15,429 notebooks.

B. Profit = REV * Demand - ( FC + VC * Demand)

REV = Profit + (FC + VC * Demand) / demand

= 11000 + ( 27000 + 0.25 * 33000) / 33000

= $ 1.40

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