Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 14

Andy Mendoza in Problem is concerned that the demand for his dolls will not exceed the break-even point. He believes he can reduce his initial investment by purchasing used sewing machines and fewer machines. This will reduce his initial investment from $25,000 to $17,000. However, it will also require his employees to work more slowly and perform more operations by hand, thus increasing variable cost from $10 to $14 per doll. Will these changes reduce his break-even point
Problem
Andy Mendoza makes handcrafted dolls, which he sells at craft fairs. He is considering massproducing the dolls to sell in stores. He estimates that the initial investment for plant and equipment will be $25,000, whereas labor, material, packaging, and shipping will be about $10 per doll. If the dolls are sold for $30 each, what sales volume is necessary for Andy to break even