The Raquet Business Is Considering the Manufacture of a New

Essay

The Raquet Business is considering the manufacture of a new type of tennis ball. Each tennis ball would sell for $3.75 and would require $1.75 in variable costs. In addition, annual fixed costs associated with the project would total $64,000.
a. Use the contribution margin approach to calculate:
(1) the breakeven point in units
(2) the breakeven point in dollars
b. Determine the operating income or loss at a sales volume of 30,000 tennis balls.
c. Determine the number of tennis balls that must be sold to earn a profit of $80,000.