BREAK-EVEN POINT Just Loft Inc. (JL), builds a loft that is easily adaptable to most dorm rooms or apartments and can be assembled into a variety of configurations. Each loft is sold for $500, and the cost to produce one loft is $300, including all parts and labor. JL has fixed costs of $100,000. a) What happens if JL produces nothing? b) Now, assume JL produces and sells one unit (loft). What are their financial results? c) Now, what do you think would happen if they produced and sold 501 units? d) How many units would JL need to sell in order to break even? e) How many units would JL need to sell if they wanted to have a pre-tax profit of $50,000?
BREAK-EVEN POINT Just Loft Inc. (JL), builds a loft that is easily adaptable to most dorm rooms or apartments and can be assembled into a variety of configurations. Each loft is sold for $500, and the cost to produce one loft is $300, including all parts and labor. JL has fixed costs of $100,000. a) What happens if JL produces nothing? b) Now, assume JL produces and sells one unit (loft). What are their financial results? c) Now, what do you think would happen if they produced and sold 501 units? d) How many units would JL need to sell in order to break even? e) How many units would JL need to sell if they wanted to have a pre-tax profit of $50,000?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:BREAK-EVEN POINT
Just Loft Inc. (JL), builds a loft that is easily adaptable to most dorm rooms or apartments and can
be assembled into a variety of configurations. Each loft is sold for $500, and the cost to produce one
loft is $300, including all parts and labor. JL has fixed costs of $100,000.
a) What happens if JL produces nothing?
b) Now, assume JL produces and sells one unit (loft). What are their financial results?
c) Now, what do you think would happen if they produced and sold 501 units?
d) How many units would JL need to sell in order to break even?
e) How many units would JL need to sell if they wanted to have a pre-tax profit of $50,000?
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