Supplement A: Winchester Furniture is considering producing a new line of kitchen chairs, which will require $30,000 in fixed costs per year. Winchester estimates the variable cost of each unit produced at $50.
If the unit selling price is set at $80, how many units must be produced and sold per year to break even? Use both algebraic and graphic approaches to get your answer.
Another option being considered by Winchester is to purchase the chairs from an outside supplier at a variable cost of $60 per unit (no fixed cost). Graphically plot the total costs for both options and determine which ranges of annual volume are best for each option.