A sporting goods manufacturer lost $400,000 on sales of $3 million in a year during the last recession. The production lines operated at only 60% of capacity during the year. Variable costs represent one-third of the sales dollars.
a) At what percent of capacity must the firm operate in order to break even?
b) What would its net income be at 80% of capacity?
c) What dollar sales would generate a net income of $700,000?
d) How much does each additional dollar of sales increase the net income?
e) How much does a $1 increase in fixed costs raise the break-even sales?

Question

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The Answer of A sporting goods manufacturer lost $400,000 on sales of $3 million in a year during the last recession. The production lines operated at only 60% of capacity during the year. Variable costs represent one-third of the sales dollars.
a) At what percent of capacity must the firm operate in order to break even?
b) What would its net income be at 80% of capacity?
c) What dollar sales would generate a net income of $700,000?
d) How much does each additional dollar of sales increase the net income?
e) How much does a $1 increase in fixed costs raise the break-even sales?

A Sporting Goods Manufacturer Lost $400,000 on Sales of $3