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Evergreen Fertilizer Company produces fertilizer. The companyâs fixed monthly cost is $25,000, and its variable cost per pound of fertilizer is $0.15. Evergreen sells the fertilizer for $0.40 per pound.1. Determine the monthly break-even volume for the company. If Evergreen Fertilizer Company in problem 2 changes the price of its fertilizer from $0.45 per pound to $0.55 per pound, what effect will the change have on the break-even volume?
2. If Evergreen Fertilizer Company increases its advertising expenditure by $10,000 per year, what effect will the increase have on the break-even volume computed in problem 2?

Respuesta :

facundobuzzetti

Answer:

Instructions are below.

Explanation:

Giving the following information:

Fixed monthly cost is $25,000

Unitary variable cost= $0.15

Selling price= $0.40 per pound

First, we need to calculate the break-even point in units:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 25,000/0.25

Break-even point in units= 100,000 pounds

Now, the selling price is $0.55

Break-even point in units= 25,000/0.4

Break-even point in units= 62,500 pounds

Finally, fixed costs increase by $10,000:

Break-even point in units= 35,000/0.25

Break-even point in units= 140,000 pounds

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