QUESTION

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# (a)A cup company wants to make a profit of $\$ 100,000$in the coming year. Pertinent information is given in the following table. Use the information to determine how many cups has to be sold to achieve this profit. (Roundup to the nearest integer) (Note: Units sold must account for total production costs (direct and overhead) plus required profit.) Table \begin{tabular}{|l|l|} \hline Direct labour hours & 0.5 hour/unit \\ \hline Direct labour costs & \$25/hour \\ \hline Direct material costs & \$4/unit \\ \hline Overhead cost &$110 \%$of direct labour \\ \hline Packaging cost & \$2/unit \\ \hline Selling price & \$40/unit \\ \hline \end{tabular} (6 marks) (b) The selling price$(\mathrm{P})$of a consumer good is set to be$P=\$600-0.003 D$ per unit, where $D$ are the total units produced The fixed cost of the factory is $\$ 25,000$per year and the total variable cost is given by$\mathrm{V}=\$500-0.007 \mathrm{D}$. Target production is 10,000 units per year. Determine the breakeven point and the level of output that will produce the maximum profit. (9 marks)  