Mop and Broom Manufacturing is evaluating whether to produce a new type of mop. The company is considering the operations requirements for the mop as well as the market potential. Estimates of fixed costs per year are $40,000, and the variable cost for each mop produced is $20.
(a) If the company sells the product at a price of $25, how many units of product have to be sold in order to break even? Use both the algebraic and graphical approaches.
(b) If the company sells 10,000 mops at the product price of $25, what will be the contribution to profit?