Conestoga Cutting Co. is starting up a new line of scissor production for supermarket distribution and sales. They estimate that the fixed cost for this new line will be $500 per month of operation. They've also determined that the variable cost per unit produced (material + labor) is $1.25. The target market price for selling has been set at $2.75 per unit. 
a) How many scissors would Conestoga Cutting Co. need to sell in a year to break even?
b) What would be the break-even point in terms of revenue dollars for the year?

Question 3

An electronics firm is currently manufacturing a PCBA component that has a raw material cost of $0.35, and it takes an average of 22.5 minutes of labor to setup the machine to be ready for a batch production quantity of 100 pieces. The technician who sets up the machine is paid $40 per hour, and this setup is required every time a batch is run.
a) Calculate the total variable cost per piece by considering the setup (labor) cost described above.

 

 

Question 4,

Consider the same electronics firm from question 3 above. Knowing that they can sell each piece for $1.00 and that their annual fixed cost of production is $14,000, they have projected sales to be 30,000 pieces for this year. However, the firm's manufacturing engineer has made a proposal that would improve product quality (yield) by adding a new piece of equipment (a "bolt-on" to the existing machine) that would cost the firm an additional $6,000 per year of fixed cost to run the machine. With this new piece of equipment, the new variable cost per piece becomes $0.60. and projected sales would jump to 50,000 pieces per year due to higher quality.
a) Do you think the firm should buy the new piece of equipment suggested by the manufacturing engineer? You must explain/show/prove your reasoning with valid data (calculations) to obtain marks on this question.

Answer rating: 100% (QA)

a To calculate the number of scissors needed to sell to break even we need to equate the total reven... View the full answer