Profit question

Question

A company producing floral arrangements has fixed costs of $25,600 per month. Each floral arrangement sells for $19 and the variable costs are $4.90 per unit.

a. Determine the number of floral arrangements that must be sold to break even.

b. Determine the profit or loss if the monthly sales were 2,400 units.

c. Determine the profit or loss if the monthly sales were 4,400 units.

d. To generate a profit of $11,500, how many floral arrangements must be sold?

Answer 1

The profit per floral arrangement is 19 - 4.90 = $ 14.10

So monthly profit if you sell s a month will be P (s) = 14.10s - 25600

(a) Find s so that P (s) = 0

(b) Find P (2400)

(c) Find P (4400)

(d) Find s so that P(s) = 11400

Note that is P(s) is +2 monthly profit of 2

If P(s) is -2, monthly loss of 2

So to break even you have to cover the fixed costs with this, ie sell 25600 / 14.10 a month = 1815.6, so sell 1816