Question

Matthew Hagen started his company, The Sign of Things to Come three years ago after graduating from Upper State University. While earning his engineering degree, Matthew became intrigued by all of the neon signs he saw at bars and taverns around the university. Few of his friends were surprised to see him start a neon sign company after leaving school. Matthew is currently considering the introduction of a new custom neon signage product that he believes will sell like hotcakes. In fact, he is estimating that the company will sell 7,000 of the signs. The signs are expected to sell for $75 and require variable costs of $25. The Sign of Things to Come has annual fixed costs of $300,000.

Required
A. How many signs must be sold to break even?
B. How many signs must be sold to earn a profit of $15,000?
C. If 7,000 signs are sold, how much profit will The Sign of Things to Come earn?
D. What would be the break-even point if the sales price decreased by 20 percent? Round your answer to the next-highest number.
E. What would be the break-even point if variable costs per sign decreased by 40 percent?
F. What would be the break-even point if fixed costs increased by $50,000?



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  • CreatedMarch 11, 2015
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