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The Hunt Company has recently purchased a plant to manufacture a new product. The following data pertain to the new operation:
Estimated annual sales 3,500units@
Estimated Costs:
Direct materials $6.OO/unit
Direct labor $1.00/unit
Factory overhead (all fixed)$12,000 per year
Selling expenses 30% sales
Administrative expenses (all fixed)$16,000 per year

a. Determine the break-even point in units and in dollars.
b. What target quantity must Hunt produce in order to realize a target profit of $14,000?
c. What is the firm's degree of operating leverage (DOL) at 5000 units?
d. Interpret the meaning ofthe value you obtained for DOL in (c).

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M966885

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