Your shoe factory has a production capacity of 10,000 units per month. Your fixed costs are...

Your shoe factory has a production capacity of 10,000 units per month. Your fixed costs are $200,000, your variable cost of production is $30 and you sell each pair for $35. The problem is that this requires you to sell 40,000 pairs of shoes each month just to breakeven – which is physically impossible given your production capacity. Assuming that you will always be able to sell out your current production capacity, which of the following changes would allow you to breakeven?

a. Cut production cost of shoes by $5

b. Increase price of shoes by $15 and increase production costs by $5

c. Increase price of shoes by $15

d. Cut fixed costs by $25,000

e. Increase price of shoes by $10 and cut fixed costs by $10,000

You need to calculate breakeven at your factory and can use two of the following pieces of information. Which two will allow you to calculate breakeven?

a. The sales price of one unit

b. Production capacity

c. Fixed costs for a period of time

d. The cost of purchasing raw materials

e. Contribution margin per unit

Expert Solution

keosha answered 11 hours ago

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