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Homework answers / question archive / A pottery maker is considering adding a new plant for additional capacity
A pottery maker is considering adding a new plant for additional capacity. The proposed facility will have fixed costs of $9500 per month and variable costs of $0.62 per unit produced. Each piece of pottery is sold to retailers at a price that averages $1.11.
What monthly volume is needed to break even?
Given,
Per month fixed cost (FC) = $9500
Per unit variable cost(VC) = $0.62
Per unit revenue (R) = $1.11
Volume needed to break even = FC / (R - VC)
= 9500 / (1.11 - 0.62)
= 9500 / 0.49
= 19387.76 units
