ABA-201 MANAGEMENT SCIENCE-1 PTELIM PERIOD PRACTICAL PROBLEMS (COST-VOLUME-PROFIT ANALYSIS) Problem#1 The owner of Old-Fashioned Berry Pies, S. Simon, is contemplating adding a new line of pies, which will require leasing new equipment for a monthly payment of $6,000. Variable costs would be $2.00 per pie, and pies would retail for $7.00 each. a) How many pies must be sold in order to break even? b) What would the profit (loss) be if 1,000 pies are made and sold in a month? c) How many pies must be sold to realize a profit of $4,000? Problem#2 Manager has the option of purchasing one, two, or three machines. Fixed costs and potential volumes are as follows: Variable cost is $10 per unit, and revenue is $40 per unit. a) Determine the break-even point for each range. b) If projected annual demand is between 580 and 660 units, how many machines should the manager purchase? Problem#3 A firm’s manager must decide whether to make or buy a certain item used in the production of vending machines. Cost and volume estimates are as follows: a) Given these numbers, should the firm buy or make this item? b) There is a possibility that volume could change in the future. At what volume would the manager be indifferent between making and buying? Problem#4 A producer of pottery is considering the addition of a new plant to absorb the backlog of demand that now exists. The primary location being considered will have fixed costs of $9,200 per month and variable costs of 70 cents per unit produced. Each item is sold to retailers at a price that averages 90 cents. a) What volume per month is required in order to break even?