Enrique Is Studying the Feasibility of Producing a New Product

question 84

Essay

Enrique is studying the feasibility of producing a new product. His existing facilities could be expanded to manufacture 2,000 new units per month. The unit cost is $75. Estimated fixed costs are $3.36 mil per year and variable costs are $25 per unit. Competitors sell a similar product for $350 each.
a) What is the break-even point as a percent of capacity?
b) What would the net income be at 80% capacity?
c) What would unit sales have to be to attain a net income of $100,000?
d) If sales dropped to 60% of capacity, what would the resulting net income be?

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