You are going to open a business making custom cabinets
You are going to open a business making custom cabinets. You can sell each cabinet for $80. It takes a cabinet maker approximately 45 minutes to make one cabinet. Each cabinet maker works an eight-hour day, earning $18 per hour. Each cabinet will use $25 in raw materials. You usually produce cabinets 20 days a month and can employ two cabinet makers. You estimate that your fixed costs are $5,000 per month.
a. What is your contribution margin?
b. How many cabinets must you make each month to break even?
c. What is your total monthly revenue if you want to earn a $2,000 profit?
d. Construct a break-even chart for the custom cabinet firm.
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