A producer of felt-tip pens has received a forecast of demand of 41,000 pens for

Question

A producer of felt-tip pens has received a forecast of demand of 41,000 pens for the coming month from its marketing department. Fixed costs of $25,000 per month are allocated to the felt-tip operation, and variable costs are 27 cents per pen. Find the break-even quantity if pens sell for $4 each. (Round your answer to the next whole number.) At what price must pens be sold to obtain a monthly profit of $16,000, assuming that estimated demand materializes? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

a.

b.

Break–Even Quantity = Fixed Cost / (SP-VC) 25000/(4-0.27) 6702.41

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