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Clear Optics break even for new product

1. See Clear Optics is considering producing a new line of eyewear. After considering the costs of raw materials and the cost of some new equipment, the company estimates fixed costs to be40,000 with a variable cost of $45 per unit produced.

a. If the selling price of each new product is set at $100, how many units need to be produced and sold to break even? Use both the graphical and algebraic approaches.

b. If the selling price of the product is set at $80 per unit, See-Clear expects to sell 2000 units. What would be the total contribution to profit from this product at this price?

c. See-Clear estimates that if it offers the product at the original target price of $100 per unit, the company will sell about 1500 units. Will the pricing strategy of $100 per unit or $80 per unit yield a higher contribution to profit?

2. Med-First is a medical facility that offers outpatient medical services. The facility is considering offering an additional service, mammography-screening test, on-site. The facility estimates the annual fixed cost of the equipment and skills necessary for the service to be $120,000. Variable costs for each patient processed are estimated at $35 per patient. If the clinic plans to charge $55 for each screening test, how many patients must it process a year in order to break even?

Solution Preview

1. See Clear Optics is considering producing a new line of eyewear. After considering the costs of raw materials and the cost of some new equipment, the company estimates fixed costs to be40,000 with a variable cost of $45 per unit produced.

a. If the selling price of each new product is set at $100, how many units need to be produced and sold to break even? Use both the graphical and algebraic approaches.
Total Revenue = 100*x
Total cost = 40000+45x
Draw the two ...

Solution Summary

Clear optics for break even of a new product is examined.

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