Question

25. Heister Corporation produces class rings to sell to college students. These rings sell for $75 each and cost $30 each to produce. Heister has FC of $45,000. 15 points

    4. 3. Heister’s CEO expects an annual profit of $200,000. How many rings must be sold to attain this profit? (round up to the nearest whole number)
    6. 2. How much profit (loss) will Heister have if it sells 800 rings? 6,000 rings?
    8. 1. Calculate Heister’s break-even point.

Answer 1

Solution;

a),Calculation of No of Units to attain $200,000 Profit

No of Units Sold = (Fixed Cost + Required Profit) / (Sales - Variable cost)

= ( $45,000 + $200,000) / ($75 - $30)

=$245,000 / $45

= 5,444.44

= 5,444 rings to be sold to atain $200,000 annual profit.

b) Profit (Loss) for Heister for the following sitution:

c) Heister’s break-even point.

Break Even point = Fixed Cost / Sales price per unit - Variable cost per unit

= $45,000 / ($75 -$30)

=$45,000 / $45

= 1,000 units

break even point in units = 1,000 rings

Break even point in Sales = 1,000 * $75 = $75,000

Note: Please check the Serial No.. of question as sequence of question was not clearly mention.