Problem
Cox Electric makes electronic components and has estimated the following for a new design of one of its products:
Fixed Cost = $13,000
Material cost per unit = $0.15
Labor cost per unit = $0.10
Revenue per unit = $0.65
Production Volume = 12,000
Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all it produces, build a spreadsheet model that calculates the profit by subtracting the fixed cost and total variable cost from total revenue, and answer the following questions.
• Construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit goes from a negative to a positive value; that is, breakeven is when total revenue = total cost, yielding a profit of zero. Vary production volume from 5,000 to 50,000 in increments of 5,000. In which interval of production volume does breakeven occur?
• Use Goal Seek to find the exact breakeven point. Assign Set cell: equal to the location of profit, To value: = 0, and By changing cell: equal to the location of the production volume in your model.