Acme Boards” makes and sells skateboards for $240.00. The costs associated with the business include variable costs of $180 per board and fixed costs of $300,000. Determine: The number of skateboards required to sell to breakeven. The profit if they have been selling about 8,000 pr year. a) Now, they are considering undertaking an advertising program with GBC Promotions that would cost $150,000 (additional fixed cost) and increasing the price by $160 to $400. Find the number of skateboards required to sell at $400 and make the same amount of profit as in part “b”. b) What is the % sales decline that can occur in c, to make the same profit as before
Acme Boards” makes and sells skateboards for $240.00. The costs associated with the business include variable costs of $180 per board and fixed costs of $300,000. Determine: The number of skateboards required to sell to breakeven. The profit if they have been selling about 8,000 pr year. a) Now, they are considering undertaking an advertising program with GBC Promotions that would cost $150,000 (additional fixed cost) and increasing the price by $160 to $400. Find the number of skateboards required to sell at $400 and make the same amount of profit as in part “b”. b) What is the % sales decline that can occur in c, to make the same profit as before
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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“Acme Boards” makes and sells skateboards for $240.00. The costs associated with the business include variable costs of $180
per board and fixed costs of $300,000. Determine:
The number of skateboards required to sell to breakeven.
The profit if they have been selling about 8,000 pr year.
a) Now, they are considering undertaking an advertising program with GBC
Promotions that would cost $150,000 (additional fixed cost) and increasing
the price by $160 to $400. Find the number of skateboards required to sell
at $400 and make the same amount of profit as in part “b”.
b) What is the % sales decline that can occur in c, to make the same profit as
before?
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Step 1: Introduce the concept of break-even point.
VIEWStep 2: a) Determine the number of skateboards required to sell to breakeven.
VIEWStep 3: b) Determine the profit if they have been selling about 8,000 pr year.
VIEWStep 4: c) Find the number of skateboards required to sell at $400 and make the same amount of profit.
VIEWStep 5: d) Calculate the % sales decline that can occur in c, to make the same profit as before.
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