Macroeconomics Answers

You are a manager at Glass Inc. a mirror and window supplier. Recently, you conducted

a study of the production process for your single-side encapsulated window. The results

from the study are summarized below and are based on the eight units of capital

currently available at your plant. Workers are paid $60 per unit, per unit capital costs

are $20, and your encapsulated windows sell for $12 each. Given this information,

optimize your human resource and production decisions. Do you anticipate earning a

profit or loss? Explain carefully

5. The ABC Company sells widgets at $9 each; variable unit cost is $6, and fixed cost is $60,000

per year.

a. What is the break-even quantity point?

b. How many units must the company sell per year to achieve a profit of $15,000?

c. What will be the degree of operating leverage at the quantity sold in part a? In part b?

d. What will be the degree of operating leverage if 30,000 units are sold per year

7. Elgar Toaster Co. is contemplating a modernization of its antiquated plant. It now sells its

toasters for $20 each; the variable cost per unit is $8, and fixed costs are $840,000 per year.

a. Calculate the break-even quantity.

b. If the proposed modernization is carried out, the new plant would have fixed costs of

$1,200,000 per year, but its variable costs would decrease to $5 per unit.

1. What will be the break-even point now?

2. If the company wanted to break even at the same quantity as with the old plant,

what price would it have to charge for a toaster?

5. What is the effect on break-even quantity of

a. A decrease in unit price?

b. A decrease in average variable cost?

c. A decrease in fixed cost?

Assume some numbers and illustrate the effect by drawing graphs showing

the break-even point.Break-Even Analysis (Volume-Cost-Profit)