Question

A small but growing manufacturer of business class network routers. They produce two main types of routers, Model A and the more expensive variant, Model B. The company has a capacity of producing 500 Model A routers per month and currently produces 300 routers of that type every month. The routers are sold to small computer stores.

The company’s expenses are given below.

What are the contribution margin and the contribution rate [round to a full number]?

What is the break-even point in units? At their current level of production, how many units above or below the break-even point is company working at? How much profit per month would be earned at the current level of production? At the current level of production what percent of capacity is utilized?

What is the BE volume as a percent of current production [use the rounded number of BE units]? What is the BE volume as a percent of capacity [use the rounded number of BE units]?

Company has decided to increase its production from the current 300 routers per month to 425 routers per month, while at the same time lowering its selling price to $85. How would this change the company’s profit? A chain store wants to purchase additional routers from company on a regular basis. To meet the new demand, company expanded their facility by renting additional space. This increased their total fixed cost by 30% and doubled their capacity to 1200 units. company wants to break-even at 25% of this new capacity. What is the lowest price they can charge per router and still break-even?

Expenses are unit price is provided below.

please provide details. Thank You.

Lease	1650	per month
Salaries	1050	per month
Other Expenses	850	per month
Materials	6	per unit
Labour	8	per unit
Sell Price	115	per unit

Answer 1