target profit volumes JetSet Machinations, Inc; expects to become very successful in the manufacture

target profit volumes

JetSet Machinations, Inc; expects
to become very successful in the manufacture and sales of its fuel-efficient
high speed airplane, the S2S-900 This plane will be sold at about $70 million
per plane

JMI executive staff has asked you
to provide them a slide presentation in the next staff meeting which gives
calculations for profit and break-even This presentation will be the basis of
the meeting discussion

Assume that JMI’s annual fixed
costs for the S2S-900 are $950 million, and its variable cost per airplane is
$45 million

Question:

1 Compute JMI’s break-even point
for the number of S2S-900 airplanes and dollars of sales

2 Suppose JMI plans to sell
forty-two S2S-900 airplanes in 2002 Compute JMI’s projected operating profit

3 Suppose JMI increased its fixed
costs by $84 million and reduced variable costs per airplane by $2 million
Compute its operating profit if forty-two S2S-900 airplanes are sold Compute
the break-even point Comment on your results

4 Next, ignore requirement 3
Suppose fixed costs do not change, but variable costs increase by 10% before
deliveries of S2S-900 airplanes begin for the year Compute the new break-even
point

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