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In: Statistics and Probability

The Gatson manufacturing company has estimated the following components for a new product. Fixed cost =...

The Gatson manufacturing company has estimated the following components for a new product. Fixed cost = $50,000 Material cost per unit = $2.15 Labor cost per unit = $2.00 Revenue per unit = $7.50 Round your answer to the nearest whole number.

1. Using a spreadsheet model, what will be the resulting profit if the company decides to make 70,000 units of the new product?

2. Construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit is zero. Vary production volume from 0 to 100,000 in increments of 10,000. In which interval of production volume does breakeven occur?

3. Using the appropriate Excel tool, find the exact breakeven point.

Please show how to solve all problems using Excel.

Solutions

Expert Solution

(1)
FC Units, x MC LC TC TR P = TR - TC
50000 70000 150500 140000 340500 525000 184500
(2)
FC Units, x MC LC TC TR P = TR - TC
50000 0 0 0 50000 0 -50000
50000 10000 21500 20000 91500 75000 -16500
50000 20000 43000 40000 133000 150000 17000
50000 30000 64500 60000 174500 225000 50500
50000 40000 86000 80000 216000 300000 84000
50000 50000 107500 100000 257500 375000 117500
50000 60000 129000 120000 299000 450000 151000
50000 70000 150500 140000 340500 525000 184500
50000 80000 172000 160000 382000 600000 218000
50000 90000 193500 180000 423500 675000 251500
50000 100000 215000 200000 465000 750000 285000
Breakeven occurs between 10000 and 20000 units of production
(3)
Let the breakeven volume be x units. Then, 50000 + 2.15x + 2x = 7.5x
Upon solving, we get x = 14925

orchestra answered 2 years ago
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