Parris Billard Supply sells all types of billard equipment, and is considering m
ID: 3248243 • Letter: P
Question
Parris Billard Supply sells all types of billard equipment, and is considering manufacturing their own brand of pool cues. Mysti Parris, the production manager, is currently investigating the production of a standard house pool cue that should be very popular. Upon analyzing the costs, Mysti determines that the materials and labor cost for each cue is $25, and the fixed cost that must be covered is $2,400 per week. With a selling price of $40 each, how many pool cues must be sold to break even? What would the total revenue be at this break-even point?
Show calculation in an Excel spreadsheet format.
Explanation / Answer
What we are seeing in the table above is basically, the profit per cue = SP/Cue - Labour cost/Cue = 40-25 = $15
Now we have a fixed overhead / week of $2400, which needs to be covered by the no of cues manufactured. At breakeven the total profit = Total cost
Therefore if x is the no of cues produced in a week then 15x = 2400 or x = 160 cues.
The revenue from produceing 160 cues = no of cues made * profit = 160*40 = $6400
a b c d e Break even Revenue Selling P Labour Profit=a-b Overhead no of cues (e*c) - d = 0 e*a 40 25 15 2400 20 -2100 800 40 25 15 2400 40 -1800 1600 40 25 15 2400 60 -1500 2400 40 25 15 2400 80 -1200 3200 40 25 15 2400 100 -900 4000 40 25 15 2400 120 -600 4800 40 25 15 2400 150 -150 6000 40 25 15 2400 170 150 6800 40 25 15 2400 165 75 6600 40 25 15 2400 160 0 6400