A Small Business Owner Is Contemplating the Addition of Another

Essay

A small business owner is contemplating the addition of another product line. Capacity increases and equipment will result in an increase in annual fixed costs of $50,000. Variable costs will be $25 per unit.
(A) What unit selling price must the owner obtain to break even on a volume of 2,500 units a year?
(B) Because of market conditions, the owner feels a revenue of $47 is preferred to the value determined in part A. What volume of output will be required to achieve a profit of $16,000 using this revenue?