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Demand and Forecasting Necessities

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Assuming that all other factor remain unchanged, determine how a firm's break even point is affected by each of the following
a. The firm finds it necessary to reduce the price per unit because of increased foreign competition.
b. The firm's direct labor costs are increased as the result of a new labor contract.
c. The Occupational Safety and Health Administration (OSHA) requires the firm to install new ventilating equipment in its plant .(Assume that this action has no effect on worker productivity).

Cool Aire Corporation manufactures a line of room air conditioners. Its break even sales level is 33,000 units. Sales are approximately normally distributed. Expected sales next year are 40, 000 units with a standard deviation of 4,000 units.
a. Determine the probability that Cool Aire will incur an operating loss.
b. Determine the probability that Cool Aire will operate above its break even points.

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Solution Summary

This solution discusses demand and forecasting necessities.