Alex Happy has developed a new product that he is considering the production and selling of...

 

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Alex Happy has developed a new product that he is considering the production and selling of it. To proceed with this project, Alex will be renting a small building to rent for $1,800 a month that will house production facilities. One major piece of equipment that will be used to manufacture the product will be rented for $750 a month. Alex purchased all of the other needed tools for $7,200 which will last for two years (depreciation will be $300 per month). Utility cost of building is expected to be $330 per month. Material costs to make the product are estimated at $12.00 per unit. Monthly advertising costs for the product are estimated at $2,500. Alex will be using salespeople for selling the product. Sales commission is $2.50 per unit. Alex has rented a truck for delivery of the products to customers at $800 per month. Alex will be paying himself $6,000 per month as salary for producing the product. Alex believes that he could produce and sell 2,000 units per month. Compute the minimum selling price per unit in order for Alex to breakeven. Alex Happy has developed a new product that he is considering the production and selling of it. To proceed with this project, Alex will be renting a small building to rent for $1,800 a month that will house production facilities. One major piece of equipment that will be used to manufacture the product will be rented for $750 a month. Alex purchased all of the other needed tools for $7,200 which will last for two years (depreciation will be $300 per month). Utility cost of building is expected to be $330 per month. Material costs to make the product are estimated at $12.00 per unit. Monthly advertising costs for the product are estimated at $2,500. Alex will be using salespeople for selling the product. Sales commission is $2.50 per unit. Alex has rented a truck for delivery of the products to customers at $800 per month. Alex will be paying himself $6,000 per month as salary for producing the product. Alex believes that he could produce and sell 2,000 units per month. Compute the minimum selling price per unit in order for Alex to breakeven.

Answer rating: 100% (QA)

SOLUTION To compute the minimum selling price per unit for Alex to break even we need to calculate the total fixed costs and the total variable costs ... View the full answer