Mop and Broom Manufacturing is evaluating whether to produce a new type of mop.

Question

Mop and Broom Manufacturing is evaluating whether to produce a new type of mop. The company is considering the operations requirements for the mop as well as the market potential. Estimates of fixed costs per year are $40,000, and the variable cost for each mop produced is $20. a) If the company sells the product at a price of $25, how many units of product have to be sold in order to break even? b) If the company sells 10,000 mops at the product price of $25, what will be the contribution to profit? $

Explanation / Answer

a) let x no. of products , then 25x = 20x + 40 , 000 x = 8000 units of products b) 25 x 10000 - 20 x 10000 - 40000 = 10 , 000 dollar profit

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