Problem Manufacturing Firm ( problems 9- 14)

Let's assume that you work for the Reliable Chair Co., a manufacturer of solid wood chairs. You have been asked by the head of the marketing department to calculate a break-even level for monthly sales. You must determine the number of chairs Reliable needs to sell each month in order to break even. During this same month last year, Reliable sold 550 chairs. Your business has enjoyed moderate growth over the last year, so you make the reasonable assumption that 600 chairs will be sold this month. Currently, Reliable chairs are selling to your dealers for $250.

Let's also assume that you have projected your company's income statement, based upon an expected volume of 600 chairs per month. That means we are estimating based on previous months. Let's also assume that you have classified each monthly expense as either fixed or variable. Currently, Reliable chairs are selling to your dealers for $250.

Direct Labor $28,400 Telephone $850 Depreciation $8,000 Insurance $500 Advertising $3,000 General Office Salaries $7,000 Utilities $900

General Maintenance $700

Direct Materials $28,000 (wood. varnish, etc.) Property Tax $4,000 Overtime Labor $1,600 Billing Costs $2,000 Month Building Rent $10,000

9. What is the Variable Cost per Unit?

10. What is Break Even in Units

11. What is Break Even in Dollars

12. Break Even for a new price of $225 to the dealer

13. BREAK EVEN units for $ 50,000 profit

14. Suppose we can only make 500 chairs, what should we sell them at to make $50,000