Explore BrainMass

Explore BrainMass

    Fixed annual and variable costs

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Please help me solve this problem.

    The Retread Tire Company recaps tires. The fixed annual cost of the recaping operation is $60,000. The variable cost of recapping a tire is $9. The company charges $25 to recap a tire.
    a) For annual volume of 12,000 tires, determine the total cost, total revenue, and profit.
    b) Determine the annual break-even volume for the retread Tire Company operation.
    c) Grahically illustrate the break-even volume for the Retread Tire Company.

    © BrainMass Inc. brainmass.com March 4, 2021, 5:59 pm ad1c9bdddf
    https://brainmass.com/business/financial-ratios/fixed-annual-and-variable-costs-21962

    Solution Preview

    Solution:

    a) The total cost is 60000 + 9X, where X is the number of tires recapped.
    Thus, when X=12000, the total cost = 60000 + 9 (12000) = $168000
    The total revenue is 25X
    Thus, when X=12000, ...

    Solution Summary

    The solution finds the break-even point for the Retread Tire Company, where variable cost per unit is given, as well as volume. This answer bring forth a depiction of whether this company is effective in using its costs wisely to generate profits.

    $2.49

    ADVERTISEMENT