received an email from Carl the operations manager from the California Container

Question

received an email from Carl the operations manager from the California Container division. They produce packaging for cell phones. Carl understands that his product is an important cash producer for the company.

•The delivery price is based on long term contracts.
•The price of the supply of cardboard has increased due to a .15 fuel surcharge added to the cost.
•Carl has a fixed monthly cost of $257,000 and delivers 3.3 million packages in the same time period for a price of $3.24.
•The variable cost of the previous package was a $1.37.
Provide the following information to Carl in an email

•At what volume was the old break-even and what is the new break-even?
•In order to make the same profit how many more packages needs to be produced?

Explanation / Answer

Old breakeven 257,000/(3.24-1.37)= 137,434 packages (rounded up) New breakeven 257,000(3.24- 1.52)= 149,419 Old profit 3,300,000* (3.24-1.37) -257,000= 5,914,000 New profit x*(3.24-1.52)- 257,000= 5,914,000 x= (5,914,000 +257,000)/(3.24-1.52)= 3,587,791 (rounded up) So 3,587,791-3,300,000= 287,791 more packages.

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