Nancy\'s Novelty Notebooks has forecast next year\'s demand to be 41,000. The no

Question

Nancy's Novelty Notebooks has forecast next year's demand to be 41,000. The notebooks are considered to incur annual fixed costs of  $26,000 and per-unit variable costs of 35 cents.

If notebooks can be sold for  $1 each, what is the break-even quantity?. (Round your answer to the next whole number.)

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 $16,000? Hint: solve for revenue (R). (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Nancy's Novelty Notebooks has forecast next year's demand to be 41,000. The notebooks are considered to incur annual fixed costs of  $26,000 and per-unit variable costs of 35 cents.

Explanation / Answer

Break even point = Fixed cost / (Sales price per unit –variable cost per unit)

In the question,

Fixed cost = $26,000

Sales price per unit =$1

Variable cost per unit=$0.35

Break even point =26000/(1-0.35) =40000 units

Answer:- 40,000 units

Answer :- Profit = Selling price * units to be sold – (Fixed cost + variable cost*units to be sold)

16000=Selling price *41,000 –(26000+0.35*41000)

Selling price = (16000+40350)/41000

Selling price =1.37

Answer :- 1.37

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