Nicholea Water LLC dispenses its product Nature’s Pure Water via vending machines with most current locations at food markets and pharmacy or chemist stores. The average monthly fixed cost per site is $900, while each gallon costs 18¢ to purify and sells for 30¢. (a) Determine the monthly sales volume needed to break even. (b) Nicholea’s president is negotiating for a sole-source contract with a municipal government where several sites will dispense larger amounts. The fixed cost and purification costs will be the same, but the sales price per gallon will be 30¢ for the first 5000 gallons per month and 20¢ for all above this threshold level. Determine the monthly breakeven volume at each site.
Nicholea Water LLC dispenses its product Nature’s Pure Water via vending
machines with most current locations at food markets and pharmacy or chemist stores. The average monthly fixed cost per site is $900, while each gallon costs 18¢ to purify and sells for 30¢. (a) Determine the monthly sales volume needed to break even. (b) Nicholea’s president is negotiating for a sole-source contract with a municipal government where several sites will dispense larger amounts. The fixed cost and purification costs will be the same, but the sales price per gallon will be 30¢ for the first 5000 gallons per month and 20¢ for all above this threshold level. Determine the monthly breakeven volume at each site.
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