1 What is the Breakeven Point of a production process that i

1. What is the Breakeven Point of a production process that is being planned with the following assumptions: * Fixed Costs are $250,000 * Variable Costs are $67.50 per unit * Sales Price is targeted at $89.49 per unit

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2. What is the Future Value of an investment of $50,000 after 10 years if it earns 4.5% compounded monthly? Give your answer to the nearest dollar.

Solution

1.Contribution margin=Sales price-Variable cost

=(89.49-67.50)=$21.99 per unit

Hence breakeven point=Fixed cost/Contribution margin

(250000/21.99)=11368.804 units

(11368.804*89.49)=$1,017,394.27

2.

We use the formula:
A=P(1+r/1200)^12n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=$50000(1+0.045/12)^(12*10)

=$50000*1.566992776

=$78350(Approx).