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Homework answers / question archive / Graphing Revenues and Costs Montana Company manufactures chocolate candy
Graphing Revenues and Costs
Montana Company manufactures chocolate candy. Its manufacturing costs are as follows:
Annual fixed costs $15,000
Variable costs $2 per box of candy
1. Plot variable costs, fixed costs, and total costs on a graph for activity levels of 0 to 30,000 boxes of candy.
2. Plot a revenue line on the graph, assuming chat Montana sells the chocolates for $5 a box.
C-V-P Analysis
The Last Outpost is a tourist stop in a western resort community. Kerry Yost, the owner of the shop, sells hand-woven blankets for an average price of $30 per blanket. Kerry buys the blankets from weavers at an average cost of $21. In addition, he has selling expenses of $3 per blanket. Kerry rents the building for $300 per month and pays one employee a fixed salary of $500 per month.
1. Determine the number of blankets Kerry must sell to break even.
2. Determine the number of blankets Kerry must sell to generate a profit of $1,000 per month.
3. Assume that Kerry can produce and sell his own blankets at a total variable cost of $16 per blanket, but that he would need to hire one additional employee at a monthly salary of $600.
a) Determine the number of blankets Kerry must sell to break even.
b) Determine the number of blankets Kerry must sell to generate a profit of $1,000 per month.
Graphing Revenues and Costs
Montana Company manufactures chocolate candy. Its manufacturing costs are as follows:
Annual fixed costs $15,000
Variable costs $2 per box of candy
1. Plot variable costs, fixed costs, and total costs on a graph for activity levels of 0 to 30,000 boxes of candy.
2. Plot a revenue line on the graph, assuming chat Montana sells the chocolates for $5 a box.
C-V-P Analysis
The Last Outpost is a tourist stop in a western resort community. Kerry Yost, the owner of the shop, sells hand-woven blankets for an average price of $30 per blanket. Kerry buys the blankets from weavers at an average cost of $21. In addition, he has selling expenses of $3 per blanket. Kerry rents the building for $300 per month and pays one employee a fixed salary of $500 per month.
1. Determine the number of blankets Kerry must sell to break even.
2. Determine the number of blankets Kerry must sell to generate a profit of $1,000 per month.
3. Assume that Kerry can produce and sell his own blankets at a total variable cost of $16 per blanket, but that he would need to hire one additional employee at a monthly salary of $600.
a) Determine the number of blankets Kerry must sell to break even.
b) Determine the number of blankets Kerry must sell to generate a profit of $1,000 per month.
Dollars Annual fixed cost = $15,000
Revenue line Variable cost = $2 per box of candy
Sales price = $5 per box of candy
145000
135000 Sales level = 0 - 30,000 boxes
125000 No. of candy boxes Sales Variable cost
0 0 0
115000 5000 25000 10000
10000 50000 20000
105000 15000 75000 30000
20000 100000 40000
95000 25000 125000 50000
30000 150000 60000
85000
75000
Variable costs line
65000
55000
45000
35000
25000
15000 Fixed cost line
0
No. of candy boxes (units)
Every dash resemble 5,000 units
1 To find break-even point, we can use the following formula
Q = F F is fixed costs
P - V P is sale price
V is variable costs
Q = 300 + 500
30 - (21 + 3)
Q = 134 blankets
2
Q = F + Profit
P - V
Q = 300 + 500 + 1,000
30 - (21 + 3)
Q = 300 blankets
3 a)
Q = F F is fixed costs
P - V P is sale price
V is variable costs
Q = 300 + 500 + 600
30 - 16
Q = 100 blankets
Q = F + Profit
P - V
Q = 300 + 500 + 600 + 1,000
30 - 16
Q = 172 blankets
