Assignment #2

Warm-up questions

1) What level of output would generate a net income of $15,000 if a product sells for $24.99, has
unit variable costs of $9.99, and total fixed costs of $55,005?

2) If the break-even point is 15,000 units, the selling price is $95, and the unit variable cost is $75,
what are the company's total fixed costs?

3) Furry Friends food manufacturing has compiled the following estimates for operations.
Sales: $762,000
Fixed cost: $150,000
Total variable cost: $590,000
Find the total cost
Find the net income.

Exam-type questions

4) Aman is thinking of starting up a personal financial service. The basic office supplies will
cost $3250 and the variable cost for each consultation is $10.25. He plans to bill each
client $50 per consultation.
What is the break-even quantity of consultations for Aman’s personal financial
consultation?
If Aman’s goal is $1000, how many consultations would he need to reach his goal?
Find the contribution margin and contribution rate.

5) Helen is thinking of running a massage therapy business. Her office rent will be $2500
per month, and she needs at least one secretary with the $36000 annual salary. She thinks
of advertising her business for 3 months with the cost of $4500. If basic office supplies
would cost her $15 per customer, and she gets 1000 customers per month, how much
should she charge each customer so that she can make $3500 a month?
How much profit will she earn if she charges each customer $50?

6) A toy company produces bath tub toys for $8 per pack of duck, frog and turtle (each pack
has a duck, a turtle and a frog). The rent and supply costs for company is $6500/month.
The material cost for each duck, turtle and frog are 40, 45, and 65 cents respectively.
Find the revenue if 10000 packs are produced and sold.
Find the total variable cost, and the total cost.
Find the break-even point.
Find the profit if 20000 packs are produced, but only 15000 packs are sold.