The Gatson Manufacturing Company Has Estimated the Following Components for a New

Essay

The Gatson manufacturing company has estimated the following components for a new product.
Fixed cost = $50,000
Material cost per unit = $2.15
Labor cost per unit = $2.00
Revenue per unit = $7.50
Note that per-unit material and labor cost together make up the variable cost per unit.
a. Using the spreadsheet model, construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit goes from a negative to a positive value, that is, breakeven is when total revenue = total cost, yielding a profit of zero. Vary production volume from 0 to 100,000 in increments of 10,000. In which interval of production volume does breakeven occur?
b. Use Goal Seek to find the exact breakeven point. Assign Set cell: equal to the location of profit, To value: = 0, and By changing cell: equal to the location of the production volume in your model.