Basics of Engineering Economy 1st Edition by Leland Blank,Anthony Tarquin

Exercise 9

At Ryerson Aggregates the main product is Rock- Glow, a natural looking pebble-matrix mix applied to swimming pool decks.It sells installed for $4.50 per square foot (sq ft).Ryerson can con­tract with several vendors for raw materials, which can cause the cost to vary from a high of $.25 to a low of $.50 per sq ft.Fixed costs average $ million per year for the product.
a.Determine the range of breakeven values as the cost varies from high to low.Does the breakeven point decrease as the variable cost is reduced as shown in Figure 8.2 b ?
b.Ryerson's owner wants a $00,000 profit per year.If sales average 350,000 sq ft annually, find the minimum allowed difference be­tween revenue and cost, and determine if the stated amounts will generate this level of profit.