J.W. Electronics sells one of its 27-inch screen TV’s for $300. The fixed cost f
ID: 2791816 • Letter: J
Question
J.W. Electronics sells one of its 27-inch screen TV’s for $300. The fixed cost for producing this type of TV is $125 000. The variable cost per unit is $175
a. Based on the above information, what is the break-even point in units? Show your calculations
b. The competition has reduced its price on a similar TV to $275. J.W. Electronics is considering reducing its selling price to $275 to compete. Find the new break-even point if the sales price is reduced to $275. Show your calculations
c. Calculate the profit realized by J.W. Electronics on the sale of 1,500 TVs if it keeps its selling price at $300. Show your calculation
d. How many TVs must J.W. Electronics sell to make a profit of $62,500 if it decides to reduce its sales price to $275? In percentage terms, how many additional or fewer TVs must be sold, as compared to the amount sold in part c)? Show your calculations.
e. Assume that J.W. Electronics decides to reduce its selling price to $275, but that one of its suppliers then increases the cost of the glass to make TV screens by $10 per TV. More bad news: the landlord increases the rent for J.W.’s office space by $5,000. Based on these two developments, what is the company’s new break-even point in units? Show your calculations.
9:15 PM 11/26/2017 Assignment 3 in Excel AUG 31-2017 Excel Abdul-Mannaan Giles Insert Draw Page Layout Formulas Data Reviow View Nitro Pro 10 Tell me what you want to do Cut AutoSum . A General Insert Delete Fommat Fill Clear. Sort& Find & Filter Select Paste B 1 U,-2-A, -Merge & Center. $-5 , 4% Conditional Format as Good Neutral Format Painter Clipboard Formatting Table xfa Based on the above information, what is the break-even point in units? Show your calculations Q3: J.W. Electronics sells one of its 27-inch screen TV's for $300. The fixed cost for producing this type of TV is $125 000. The variable CLR6 L7Obj.2 & 4 1 cost per unit is $175 2 la. Based on the above information, what is the break-even point in units? Show your calculations b. The competition has reduced its price on a similar TV to $275. J.W. Electronics is considering reducing its selling price to $275 to compete. Find the new break-even point if the sales price is 7 reduced to $275. Sh ow your calculations 10 c. Calculate the profit realized by J.W. Electronics on the sale of 1,500 TVs if it keeps its selling price 12 at $300. Shovw 13 ow your calculations. 16 17 18 d. How many TVs must A. Electronics sell to make a profit of $62,500 if it decides to reduce its sales price to $275? In percentage terms, how many additional or fewer TVs must be sold, as ? Show your calculations. 19 compared to the amount sold in 20 23 24 25 26 Question 1 Q2 Q3 Q4 Q5-7 Q8-9 + 100%Explanation / Answer
a) Break-even Point = Fixed Cost / (Price - Variable Cost) = 125,000 / (300 - 175) = 1,000 units
b) New Break-even point = 125,000 / (275 - 175) = 1,250 units
c) Profits = Unit Sales x (Price - Variable Cost) - Fixed Cost = 1,500 x (300 - 175) - 125,000 = $62,500
d) 62,500 = Unit Sales x (275 - 175) - 125,000 => Unit Sales = 1,875 units
Hence, it must sell 50% (1875 / 1250 - 1) more units.
e) New Break-even point = Fixed Cost / (Price - VC) = (125,000 + 5,000) / (275 - (175 + 10)) = 1,444 units
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