IceLess is an anti-icing solution sold in gallon plastic jugs. It is poured into the windshield washer bottle of your car. Wash your windshield and the solution prevents the glass from icing over for about four hours. Production incurs the following fixed and variable costs. It is priced initially at $5.50 per gallon. Fixed costs (per year) Rent Utilities Managerial salaries Flammability permit Other fixed expense Total fixed $18000 13200 20000 12000 2400 $65600 Variable Costs per gallon Glycol FreezeFree 312 Mfg labor Packaging Inert ingredients Advertising Total $1.50 .50 .20 .20 .60 .30 $3.30 1. What is the annual breakeven production quantity (use above data, show work)?

IceLess is an anti-icing solution sold in gallon plastic jugs. It is poured into the windshield washer bottle of your car. Wash your windshield and the solution prevents the glass from icing over for about four hours. Production incurs the following fixed and variable costs. It is priced initially at $5.50 per gallon. Fixed costs (per year) Rent Utilities Managerial salaries Flammability permit Other fixed expense Total fixed $18000 13200 20000 12000 2400 $65600 Variable Costs per gallon Glycol FreezeFree 312 Mfg labor Packaging Inert ingredients Advertising Total $1.50 .50 .20 .20 .60 .30 $3.30 1. What is the annual breakeven production quantity (use above data, show work)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.

Question

IceLess is an anti-icing solution sold in gallon plastic jugs. It is poured into the windshield washer bottle
of your car. Wash your windshield and the solution prevents the glass from icing over for about four
hours. Production incurs the following fixed and variable costs. It is priced initially at $5.50 per gallon.
1.
Fixed costs (per year)
Rent
Utilities
Managerial salaries
Flammability permit
Other fixed expense
Total fixed
$18000
13200
20000
12000
2400
$65600
Variable Costs per gallon
Glycol
FreezeFree 312
Mfg labor
Packaging
Inert ingredients
Advertising
Total
$1.50
.50
.20
.20
.60
.30
$3.30
What is the annual breakeven production quantity (use above data, show work)?
2. What revenue would the sale of the breakeven quantity for $5.50 per gallon generate?
3. The production department says 29000 gallons is its maximum production capability.
Management insists on earning $94400 above fixed costs. All costs are as given initially. What
price must be charged per gallon if only 29000 gallons can be produced and also $94400 above
fixed costs is earned? (show your calculations)

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