Q1. THE RETREAD TIRE COMPANY

a). fixed annual cost $65000

Variable cost $7.5

Company charges $25

(i).Total annual variable cost; variable cost * annual sales volume

$7.5 * 15000 tires=$112,500

Total cost =variable cost + fixed cost

$112500+$65000=$177,500

(ii). Total revenue; -total income the company makes from sales

Total revenue=Company charges per tire * annual sales volume

$25*15000 tires=$375000

(iii). Annual Profit; -total revenue – total cost

Profit= $375,000- $177,500

=$197,500

Q2. EVERGREEN FERTILISER COMPANY

Fixed monthly cost=$25000

Variable cost per pound =$0.20

Selling price per pound =$0.45

Determine the monthly break even volume;

Break even sales volume = total fixed cost/ (selling price- variable cost per unit)

=$25000/ ($0.45-$0.20)

= 100000pounds

Q3. Evergreen changes selling price from $0.45 to $0.55

= $25000/ ($0.55-$0.20) = 71428.57143 pounds

The break-even volume reduces by 28571.42857 pounds during that month.

Q4. EVERGREEN increases its advertising expenditure per year to $ 10000

Advertising expenditure per month after the increase = $10000/12months=$833.33

New Fixed monthly cost =$(25000+833.33) =$25833.33

New break-even volume= $25833.33/ ($0.45-$0.20) = 103,333.32pounds

The break-even volume increases by 3333.32pounds.

Q5. Mc coy’s hot dog stand

Fixed cost -$3000+$3500=$6500

Variable cost per hotdog =$0.40

Sales volume for the season =1500 hotdogs *6 games= 9000 hotdogs

a). price to charge to break-even

Selling price = fixed cost/break-even volume+ (variable cost)

($6500/$9000)+ $0.40) = $1.12

b). the fixed cost might either increase therefore increasing the breakeven volume, also causing an increase in the break-even price. If the fixed cost reduce their will be a decrease in the breakeven volume and therefore reducing the break-even price.

If the variable cost to produce one hotdog increases during the season the break-even volume and the price per hotdog also increases, if the variable cost drops then the break-even price and volume also reduces.

Q6. ONLINE MBA PROGRAM:

Fixed cost-$400000

Variable cost-$10000

Selling price-$20000

a). break-even volume; - fixed cost/ (selling price- variable cost)

$400000/ ($20000 - $10000) = 40students for the first year.

b). profit;

Profit = total revenue –total cost

Total revenue- 80 students*$20000=$1600000

Total cost –fixed cost + variable cost

=$400000+$10000=$410000

Profit =$1600000- $410000=$1,190,000

c).

Increment on tuition to $25000

Enrolment reduces to 50 students.

First determine the effect of this change on the variable cost;

Variable cost=sales price-(fixed cost/break even volume)

=$25000-($400000/ 50 students) =$17000

The college should consider the increment because it reduces the variable cost incurred by the college to $17000.