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.