Fellwell is a company producing flight safety parachutes for drones. The cost of producing a parachute can be breakdown into fixed cost of $50000 per year and variable cost of $200 per parachute. (a) Explain how gross profit from selling parachute can be computed. (b) If the company sold the parachute harness at $300 per harness, what is the minimum sales quantity per month for the company to break even? (c) If the company decides to sell the harness at $450 per harness, what is the minimum sales quantity per month to break even? (d) What are the factors that affect whether the company could price its parachute harness at $450 instead of $300?
Fellwell is a company producing flight safety parachutes for drones. The cost of producing a parachute can be breakdown into fixed cost of $50000 per year and variable cost of $200 per parachute. (a) Explain how gross profit from selling parachute can be computed. (b) If the company sold the parachute harness at $300 per harness, what is the minimum sales quantity per month for the company to break even? (c) If the company decides to sell the harness at $450 per harness, what is the minimum sales quantity per month to break even? (d) What are the factors that affect whether the company could price its parachute harness at $450 instead of $300?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Fellwell is a company producing flight safety parachutes for drones. The cost of producing a
parachute can be breakdown into fixed cost of $50000 per year and variable cost of $200 per
parachute.
(a)
Explain how gross profit from selling parachute can be computed.
(b)
If the company sold the parachute harness at $300 per harness, what is the minimum
sales quantity per month for the company to break even?
(c)
If the company decides to sell the harness at $450 per harness, what is the minimum
sales quantity per month to break even?
(d)
What are the factors that affect whether the company could price its parachute harness
at $450 instead of $300?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3f6d05f2-54dd-401e-babd-c54c996e53b7%2Fa95dd95b-47aa-4066-afed-f558b170e80d%2Ff8ovs0f_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Fellwell is a company producing flight safety parachutes for drones. The cost of producing a
parachute can be breakdown into fixed cost of $50000 per year and variable cost of $200 per
parachute.
(a)
Explain how gross profit from selling parachute can be computed.
(b)
If the company sold the parachute harness at $300 per harness, what is the minimum
sales quantity per month for the company to break even?
(c)
If the company decides to sell the harness at $450 per harness, what is the minimum
sales quantity per month to break even?
(d)
What are the factors that affect whether the company could price its parachute harness
at $450 instead of $300?
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