Neptune company produces toys and other items for use in beach and resort areas.

Question

Neptune company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $2.60 per unit. Enough capacity exists in the company's plant to produce 30, 000 units of the toy each month. Variable expenses to manufacture and sell one unit would ne $1.66, and fixed expenses associated with the toy would total $41,800 per month. The company's Marketing Department predicts that demand for the new toy will exceed the 30, 000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $2,090 per month. Variable expenses in the rented facility would total $1.82 per unit, due to somewhat less efficient operations than in the main plant. Compute the monthly break-even point for the new toy in unit sales and in dollar sales. (Round "per unit" to decimal places, intermediate and final answers to the nearest whole number.)

Explanation / Answer

1.

Break even point in unit sales is 50,115 units and cost is $130,299.

2.

Unit to be sold to make a monthly profit of $9,750 is Profit/Contribution margin above 30,000 units

$9,750/0.78 = 12,500 units

sothe unit sold is over and above 50,115 units.

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