The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit.
Consider each case separately:
Q1. a. What is the current annual operating income?
b. What is the current breakeven point in revenues?
Compute the new operating income for each of the following changes:
Q2. A $0.04 per unit increase in variable costs
Q3. A 10% increase in fixed costs and a 10% increase in units sold
Q4. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable cost per unit, and a 40% increase in units sold
Compute the new breakeven point in units for each of the following changes:
Q5. A 10% increase in fixed costs
Q6. A 10% increase in selling price and a $20,000 increase in fixed costs