Go Green is a business selling worm farm start-up kit for $12 each. This year, G

Question

Go Green is a business selling worm farm start-up kit for $12 each. This year, Go Green's fixed cost totals $110,000. The variable cost per kit is $7. Required What is the break-even point in number of kits? How many kits does Go Green needs to sell to earn a profit of $70,000? If the total fixed cost increases to $160,000 next year What will Go Green's break-even point be in number of kits? What profit (or loss) will Go Green have if it sells 30,000 kits? How many kits will Go Green have to sell to earn a profit of $70,000?

Explanation / Answer

a. Break even point = Fixed Cost / ( Sale Price per unit - Variable cost per unit)

Hence in this case = 1,10,000 / (12-7) = 22,000

b. In order to earn $70,000 profit Go Green has to sell 36,000 kits

c.i) Break Even point = Fixed Cost / ( Sale Price per unit - Variable cost per unit)

Hence in this case = $160,000 / (12-7) = 32000

c.ii) If Go green sells 30,000 kits the Gain/Loss will be = Sales = 30,000*12 - Variable Cost ( 30,000*7) - Fixed Cost (160,000) = 360,000 - 210,000 - 160,000 = Loss of $10,000.

c.iii) In order to earn $70,000 profit Go Green has to sell 46,000 kits

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