The Willow Furniture Company produces tables.

The fixed monthly cost of production is $8,000,

and the variable cost per table is $65. The tables sell for $180 apiece.

a. For a monthly volume of 300 tables, determine the total cost, total revenue, and profit.
Total Cost = Fixed cost + (variable cost) (Number of tables)
Total Cost = 8000 + (65) (300) = 27,500
Total Revenue = (Item price) (Number of items)
Total Revenue = (180) (300) = 54,000
Total Profit = Total Revenue – Total cost
Total Profit = 54000 – 27500 = 26,500

b. Determine the monthly break-even volume for the Willow Furniture Company.
Let no. of items = x
Total Profit = 0 (to find the break even point)
Total Profit = (number of items) (item price) -〔( fixed cost) + (variable cost per item) ( No. of
items )〕
0 = 180 x – (8000 + 65 x)
= 115 x – 8000 = 0
= 115x = 8000
= x = 8000 / 115
BEV=FC/SP-VC = 8000/(180-65) = 69.56 Tables
Monthly break even volume = 70
The Retread Tire Company recaps tires.
The fixed annual cost of the recapping operation is $60,000.
The variable cost of recapping a tire is $9.
The company charges $25 to recap a tire.

a. For an annual volume of 12,000 tires, determine the total cost, total revenue, and profit.
*Total Cost= 60000 ( 9 x 12,000)
Total Cost = 60000 + 108 000
Total Cost = 168000

Total Revenue = 25 (12000)

Total Revenue = 300 000

Total Profit = 300000 – 168 000

Total Profit = 132 000

b. Determine the annual break-even volume for the Retread Tire Company operation.

This is the point, where the revenue and the cost incurred by the company
equals. We can make the break even point occur at y-tires.
Cost of recapping y tires = Revenue from y tires
60,000 + 9y = $25
60,000 = 25y - 9y
60,000 = 16y
y = 3,750 litres
It means that on recapping 3,750 tires, the cost will be equal to the revenue
generating 0 profit , which is the break even point.
c. Graphically illustrate the break-even volume for the Retread Tire Company
Andy Mendoza makes handcrafted dolls, which he sells at craft fairs. He is considering mass
producing the dolls to sell in stores. He estimates that the initial investment for plant and
equipment will be $25,000, whereas labor, material, packaging, and shipping will be about $10
per doll. If the dolls are sold for $30 each, what sales volume is necessary for Andy to break
even?  Sales volume of 1250 is needed to break even
Scenario 1- Fixed cost = $25000 Variable cost= $10 Price = $30

To breakevem $30x = $10x + 25000 where x is number of dolls sol

20x = 25000 . X = 1250 units

Andy Mendoza in Problem 3 is concerned that the demand for his dolls will not exceed the
break-even point. He believes he can reduce his initial investment by purchasing used sewing
machines and fewer machines. This will reduce his initial investment from $25,000 to $17,000.
However, it will also require his employees to work more slowly and perform more operations
by hand, thus increasing variable cost from $10 to $14 per doll. Will these changes reduce his
break-even point?
Scenario 2

Fixed cost = $17000 VC=$14 Price =$30

To breakeven 30x = 14x + 17000

16x= 17000

x = 1062.5

Decrease