Northwest Molded molds plastic handles with a variable cost of $1.00 per handle. The fixed cost to run the molding machine is $2560 per week. If the company sells the handles for $3.00 each, how many handles must be molded weekly to break even? What is the profit if 1500 handles are produced and sold?

Accepted Solution

Answer:To break even it  must be molded 1280 handles weekly.The profit if 1500 handles are produced and sold is $440Step-by-step explanation:To break even, the amount of total cost must be the same as the amount of revenues.  Total Cost is Fixed cost plus unitary variable cost multiplied by the produce quantity.  Total cost= FC + vc*QWhere FC=Fixed costvc=unitary variable cosQ=produce quantityRevenue= Price * QBreak even FC + vc*Q=Price * QIsolating QFC=(Price * Q)-(vc*Q)FC=(Price-vc) * QQ= FC/(Price-vc)Q= $2560/($3.00-$1.00)=1280 If we sold 1500 handlesProfit = Revenue- Total cost =(Price * Q)-(FC + vc*Q)P=$3.00 *1500-$2560 - $1.00*1500=P=$4500-$2560-$1500=440