Skill Building Exercise 6a On Page 220

Question

Skill Building Exercise 6a Is An Exercise Page 220 On The Pert Chart Build the Pert Chart described in your textbook and attach it to this assignment along with the answers to the two questions in the Break Even analysis based on the problem as outlined below. Break Even Analysis: On a recent vacation trip to Juarez, Mexico, you noticed a small store and street vendors selling original art. The prices ranged from $3 to $25 U.S. A flash of inspiration hit you, why not sell Mexican art back home in the U.S. using a van as your store? Every three months you could drive the 350 miles to Mexico and load up on art. You anticipate that you could negotiate generous large-quantity discounts from the Mexican vendors. Back in the U.S., you could park your van on busy streets or nearby parks, wherever you could obtain a permit. Your think the only advertising needed would be to display the art outside the van. Your intention is to operate your traveling art sale about 12 hours per week. If you can make enough money from your business, you could attend classes full time during the day. You intend to sell the original painting at an average of $15 a unit. Based on preliminary analysis, you have discovered that your primary fixed costs per month would be: $500 for payment on a van, $125 for gas and maintenance, $50 for insurance, and $45 for a street vendor's permit. You will also be driving to Mexico every three months at $400 per trip, resulting in a $133.33 per month travel cost. Your variable costs would be an average of $5 per painting and 45 cents for wrapping each painting in brown paper. Questions: Question 1: How many paintings will you have to sell each month before you start to make a profit? Include your calculations with units. Question 2: If the average cost of your paintings rises to $8, how many pieces of art will you have to sell each month if you hold your price to $15 per unit? Include your calculations with units.

Dr. Jack HW Helper · Accepted Answer

Introduction Entrepreneurship often involves calculating break-even points to determine the minimum sales required for profitability. This case study investigates such calculations for a traveling art business based on a scenario of selling original Mexican art in the United States. The problem requires building a Pert chart to organize tasks and calculations for breaking even under current and increased variable costs. Development of the Break-Even Analysis The primary goal is to determine the minimum number of paintings needed to be sold monthly to cover fixed and variable costs. To solve this, we first identify all relevant costs and revenues to develop the break-even point (BEP) formula: BE P (units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit) Step 1: Calculate Fixed Costs Fixed costs include monthly expenses and quarterly trip costs allocated per month: Van payment: $500 Gas and maintenance: $125 Insurance: $50 Permit: $45 Travel cost per quarter: $400 per trip; quarterly trips: 4 per year; so, monthly travel cost = $400 / 3 ≈ $133.33 Total fixed costs per month are therefore: Fixed costs = $500 + $125 + $50 + $45 + $133.33 ≈ $853.33 Step 2: Calculate Contribution Margin per Unit Current selling price per painting: $15 Variable costs per painting: $5 (materials) + $0.45 (wrapping) = $5.45 Contribution margin per painting = $15 - $5.45 = $9.55 Step 3: Calculate Break-Even Point (Question 1) Number of paintings to sell per month to break even: BE units = $853.33 / $9.55 ≈ 89.27 Thus, the business must sell approximately 90 paintings monthly to start making a profit. Step 4: Adjust for Increased Costs (Question 2) If the average cost of paintings increases to $8, variable costs per unit become: $8 (new cost) + $0.45 (wrapping) = $8.45 Contribution margin per painting = $15 - $8.45 = $6.55 Recalculate break-even point: BE units = $853.33 / $6.55 ≈ 130.30 Therefore, if costs rise to $8 per painting, approximately 131 paintings must be sold mont

Skill Building Exercise 6a On Page 220

Skill Building Exercise 6a Is An Exercise Page 220 On The Pert Chart

Questions:

Question 1:

Question 2:

Paper For Above instruction

Introduction

Development of the Break-Even Analysis

Step 1: Calculate Fixed Costs

Step 2: Calculate Contribution Margin per Unit

Step 3: Calculate Break-Even Point (Question 1)

Step 4: Adjust for Increased Costs (Question 2)

Conclusion

References