Reference no: EM132517593
Company YOYO is specialized in manufacturing a single type of perfume made from Rose scent. The general manager has hired you as a financial analyst in order to study the cost structure and provide the board of shareholders with pertinent recommendations.
After careful investigation, you discovered that the variable cost per manufactured unit is at $40. Furthermore, the company incurs the following expenses:
- Rent: $10,000
- Electricity: $5,000
- Depreciation of the machines: $6,000
- Salary of administrative employees: $19,000
- Rose scent employed in the manufacturing process (variable cost): 100 liters at $400 per liter
Each bottle of perfume consumes 50 ml (0.05 liter) of Rose scent.
Requirements:
Question 1. Calculate the total fixed cost for company YOYO.
Question 2. In reality, the company YOYO has produced 2,000 bottles of perfume. Evaluate the minimum price P the company should sell one bottle of perfume in order to start realizing a net profit?
Question 3. The company decided to sell each bottle of perfume at $80 per unit. Draw in the same figure the sales and total cost (note: the x-axis represents the quantity Q).
Question 4. Given that selling price is P = $80 per bottle, evaluate the breakeven point (in quantity) for company YOYO.