A producer of pottery is considering the addition of a new plant to absorb the backlog of demand

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QUESTION:

A producer of pottery is considering the addition of a new plant to absorb the backlog of demand that now exists. The primary location being considered will have fixed costs of $9,200 per month and variable costs of 70 cents per unit produced. Each item is sold to retailers at a price that averages 90 cents.

a. What volume per month is required in order to break even?

b. What profit would be realized on a monthly volume of 61,000 units? 87,000 units?

c. What volume is needed to obtain a profit of $16,000 per month?

d. What volume is needed to provide a revenue of $23,000 per month?

e. Plot the total cost and total revenue lines.


 

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