Question

Information about a pickling company is given below.

(Pickling: A plot to be built is the name given to the stripping of vegetative or soft soil on a land to be filled, and the soil on the ore in open mining enterprises.)

Variable Expenses Electricity Expenses: 100 TL/m3

Diesel and Oil Expenses: 500 TL/m3

Tire and Spare Parts Expenses: 400 TL/m3

Explosive Expenses: 300 TL/m3

Other Variable Expenses: 200 TL/m3

Fixed costs Depreciation, insurance and interest expenses: 1.5 billion TL/year

Compulsory labour and personnel expenses: 0.5 billion TL/year

Other Fixed Expenses: 0.5 billion TL/year Revenue: 5000 TL/m3

Production Capacity is 2000000 m3 /year

a) Find the breakeven point as the production amount?

b) Find the amount of pickling that the company needs to make in order to make a profit of 3 billion TL/year.

Answer 1

A) Break-Even point is the production level where Total Cost equals Total Revenue

Total Cost: Variable Costs + Fixed Cost

Variable Cost: Variable Expenses Electricity Expenses + Diesel and Oil Expenses+ Tire and Spare Parts Expenses+ Explosive Expenses+ Other Variable Expenses

Variable Cost : 1500Q, where Q is the quantity produced

Fixed Cost:  Fixed costs Depreciation, insurance and interest expenses + Compulsory labour and personnel expenses+ Other Fixed Expenses

Fixed Cost: 2.5 billion or 2,500,000,000

Total Cost: 2500000000 + 1500 Q

Total Revenue : 5000Q

Now, Break-even

B) Total Cost: 2500000000 + 1500 Q

Total Revenue : 5000Q

For revenue of 3 billion: