Question

Kramerica Industries has successfully completed production of its “tip calculators” and would like to perform a break-even profit model analysis. The combination of equipment purchase cost and other resource and facility fixed costs total $550,000. Each calculator costs $12 to produce, but will sell for $38.

a.) How many calculators does Kramerica need to sell in order to achieve a volume break-even point?

b.) What is the corresponding revenue break-even point?

c.) How can Kramerica use the volume break-even point value calculated in part (a)? NOTE: The Excel spreadsheet can be very useful for this part as it performs many of these calculations.). In other words:

a.) What types of recommendations would you make to America if the expected number of calculator sales is 22,000 over the next year? (i.e., Are they going to be profitable; if so, by how much?

b.) Is there going to be a loss; if so, how much? If there is a loss, what might you recommend?).

d.) Please sketch a plot of the “Revenues and Costs” versus the “Number of Calculators”, and include both the total revenue and total cost lines, and also the volume and revenue break-even points (you can do this manually). Clearly label the x-axis and y-axis, and indicate the points of Fixed Costs, volume break-even point, and revenue break-even point.

Answer 1

Please rate. Thanks !!!