question archive Smithson Cutting is opening a new line of scissors for supermarket distribution

Smithson Cutting is opening a new line of scissors for supermarket distribution

Subject:Operations ManagementPrice:2.87 Bought7

Smithson Cutting is opening a new line of scissors for supermarket distribution. It estimates the fixed cost to be $500 and the variable cost to be $.50/unit. Selling price is estimated to be $.75 per unit. What is the breakdown point in units?What is the breakeven point in dollars?

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Answer:

Given Fixed cost F= $500

Variable cost(V)= $.50 / unit

Selling price(S)= $.75/unit

What is the breakdown point in units?

Break down(Q) = F/(S-V)

= 500/ (0.75-0.5)

= 2000

At 2000 units Smithson cutting gets breakdown

What is the breakeven point in dollars?

To convert Q in to dollar terms multiply Q with selling price S

Breakeven point in dollars = 2000* 0.75 = $1500

Smithson Cutting gets breakdown point at $1500 dollars

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