Casey Corporation is a manufacturing company that makes small electric motors it
ID: 2420931 • Letter: C
Question
Casey Corporation is a manufacturing company that makes small electric motors it sells for $25 per unit. The variable costs of production are $10 per motor, and annual fixed costs of production are $390,000. How many units of product must Casey make and sell to break even? How many units of product must Casey make and sell to earn a $114,000 profit? The marketing manager believes that sales would increase dramatically if the price were reduced to $20 per unit. How many units of product must Casey make and sell to earn a $114,000 profit, if the sales price is set at $20 per unit?Explanation / Answer
a. Breakeven units = Fixed cost / Contribution per unit
= 390000 / (25-10)
= 26000 units
b. Units to make and sell to earn profit = (390000 + 114000) / 15
= 33600 units
c. Units to make and sell = (390000 + 114000)/(20-10)
= 50400 units