A Camera Manufacturer Spends $\$2,000$ Each Day For Overhead Expenses Plus $\$9$ Per Camera For Labor And Materials. The Cameras Sell For $\$17$ Each.a. How Many Cameras Must The Company Sell In One Day To Equal Its

Introduction

In the competitive world of camera manufacturing, companies must carefully manage their expenses and revenue to stay profitable. A camera manufacturer spends $\$2,000$ each day for overhead expenses plus $\$9$ per camera for labor and materials. The cameras sell for $$17$ each. In this article, we will delve into the world of business and explore how many cameras the company must sell in one day to equal its expenses.

Understanding the Costs

The company incurs two types of costs: fixed costs and variable costs. Fixed costs are expenses that remain the same even if the company produces more or fewer units. In this case, the fixed cost is $\$2,000$ per day for overhead expenses. Variable costs, on the other hand, are expenses that vary directly with the number of units produced. The variable cost per camera is $\$9$ for labor and materials.

Calculating the Break-Even Point

To determine how many cameras the company must sell to equal its expenses, we need to calculate the break-even point. The break-even point is the point at which the total revenue equals the total cost. We can use the following formula to calculate the break-even point:

Break-Even Point (BEP) = Fixed Costs / (Selling Price - Variable Cost per Unit)

In this case, the fixed costs are $\$2,000$, the selling price is $\$17$, and the variable cost per unit is $\$9$. Plugging these values into the formula, we get:

BEP = $\$2,000$ / ($\$17$ - $\$9$) BEP = $\$2,000$ / $\$8$ BEP = 250

Interpreting the Results

The break-even point of 250 cameras means that the company must sell at least 250 cameras per day to equal its expenses. If the company sells fewer than 250 cameras, it will incur a loss. If it sells more than 250 cameras, it will make a profit.

Sensitivity Analysis

To understand how changes in the selling price or variable cost per unit affect the break-even point, we can perform a sensitivity analysis. Let's assume that the selling price increases by $\$1$ to $\$18$ per camera. We can recalculate the break-even point using the same formula:

BEP = $\$2,000$ / ($\$18$ - $\$9$) BEP = $\$2,000$ / $\$9$ BEP = 222.22

As we can see, an increase in the selling price by $\$1$ reduces the break-even point by 27.78 cameras. This means that the company can sell fewer cameras to equal its expenses if the selling price increases.

Conclusion

In conclusion, a camera manufacturer spends $\$2,000$ each day for overhead expenses plus $\$9$ per camera for labor and materials. The cameras sell for $$17$ each. To equal its expenses, the company must sell at least 250 cameras per day. A sensitivity analysis shows that changes in the selling price or variable cost per unit can affect the break-even point. By understanding the costs and revenue, businesses can make informed decisions to stay profitable in a competitive market.

Additional Considerations

• Economies of scale: As the company produces more cameras, it may be able to negotiate better prices with suppliers, reducing the variable cost per unit.
• Marketing and advertising: The company may need to invest in marketing and advertising to increase demand and sales.
• Product differentiation: The company may need to differentiate its products to increase the selling price and reduce competition.

Final Thoughts

In the world of business, understanding the costs and revenue is crucial to making informed decisions. By calculating the break-even point and performing sensitivity analysis, companies can determine how many units they need to sell to equal their expenses. This knowledge can help businesses stay profitable and competitive in a rapidly changing market.

Introduction

In our previous article, we explored how a camera manufacturer spends $\$2,000$ each day for overhead expenses plus $\$9$ per camera for labor and materials. The cameras sell for $$17$ each. We calculated the break-even point to be 250 cameras per day. In this article, we will answer some frequently asked questions related to the camera manufacturer's profitability.

Q&A

Q: What is the break-even point, and why is it important?

A: The break-even point is the point at which the total revenue equals the total cost. It is important because it helps businesses determine how many units they need to sell to equal their expenses. If a company sells fewer units than the break-even point, it will incur a loss. If it sells more units, it will make a profit.

Q: How does the break-even point change if the selling price increases?

A: If the selling price increases, the break-even point decreases. This means that the company can sell fewer units to equal its expenses. For example, if the selling price increases by $\$1$ to $\$18$ per camera, the break-even point decreases to 222.22 cameras per day.

Q: How does the break-even point change if the variable cost per unit increases?

A: If the variable cost per unit increases, the break-even point increases. This means that the company needs to sell more units to equal its expenses. For example, if the variable cost per unit increases by $\$1$ to $\$10$ per camera, the break-even point increases to 300 cameras per day.

Q: What is the impact of economies of scale on the break-even point?

A: Economies of scale can reduce the variable cost per unit, which can decrease the break-even point. This means that the company can sell fewer units to equal its expenses. For example, if the company is able to negotiate a better price with suppliers, reducing the variable cost per unit by $\$1$ to $\$8$ per camera, the break-even point decreases to 250 cameras per day.

Q: What is the impact of marketing and advertising on the break-even point?

A: Marketing and advertising can increase demand and sales, which can decrease the break-even point. This means that the company can sell fewer units to equal its expenses. For example, if the company is able to increase sales by 10% through effective marketing and advertising, the break-even point decreases to 225 cameras per day.

Q: What is the impact of product differentiation on the break-even point?

A: Product differentiation can increase the selling price and reduce competition, which can decrease the break-even point. This means that the company can sell fewer units to equal its expenses. For example, if the company is able to differentiate its products and increase the selling price by $\$2$ to $\$19$ per camera, the break-even point decreases to 200 cameras per day.

Conclusion

In conclusion, understanding the break-even point and its relationship with the selling price, variable cost per unit, economies of scale, marketing and advertising, and product differentiation is crucial for businesses to make informed decisions. By answering these frequently asked questions, we hope to provide a better understanding of the camera manufacturer's profitability and how it can be improved.

Additional Considerations

• Risk management: Businesses should consider the risks associated with changes in the selling price, variable cost per unit, and demand.
• Strategic planning: Businesses should develop a strategic plan to achieve their goals and objectives.
• Performance measurement: Businesses should regularly measure their performance to identify areas for improvement.

Final Thoughts

In the world of business, understanding the break-even point and its relationship with various factors is crucial for making informed decisions. By answering these frequently asked questions, we hope to provide a better understanding of the camera manufacturer's profitability and how it can be improved.