Answer to Question #146255 in Economics for TmTm

Question

nicholea water llc dispenses its pr machines with most curent locations at food markets and pharmacy or chemist stores. the average monthly fixed cost per site is $900. while each gallon costs ise to purify and sells for 30%.
(a) determine the monthly sales volume needed to break even.
(b) nicholea's president is negotiating for a sole-source contract with a municipal govemment where several sites will dispense larger amounts. the fixed cost and purification costs will be the same, but the sales price per gallon will be 30% for the first 5000 gallons per month and 20% for all above this threshold level. determine the monthly breakeven volume at each site.

Answer 1

(a) The monthly sales volume needed to break even is:

$Q = \frac{900} {1 - 0.3} = 1,285.7$ units.

(b) If the sales price per gallon will be 30% for the first 5000 gallons per month and 20% for all above this threshold level, then the monthly breakeven volume at each site is the same as in a.