There are two ways to produce television sets; each has a different cost structure as follows:
There are two ways to produce television sets; each has a different cost structure as follows:
Process A Process B
Unit Sales price = $120,00 unit sales price = $150,00
Unit Variable cost = $75,00 unit variable cost = $90,00
Fixed Cost = $4,500 fixed cost = $5,400
A) What is the break-even volume ( ex How many telvesion sets must be sold to Breakeven) for process A?
B) if you sold 95 television sets, what would the profit be if you used process A? Process B?
C) Which process ( A or B) would you choose to use if you knew with certainty that you would sell 98 television sets? What about if you knew for certainty the you would sell 100 television sets? Explain.
D) Draw the break even graph for process A and B.
E) At what quantity will the profits or losses be the same
Quantity= Fixed Costs/(Unit Selling Price – Unit Variable Cost)
Profit = (U.S.P.)(Quantity) – [(U.V.C.)(Quantity) +Fixed Costs]
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