Sensitivity analysis
- If you can sell a product for $67 and it costs you $28 per unit to produce, while also paying $3,900 per month in fixed expenses, how many units must you sell each month in order to earn a monthly profit of $2,500? Show all your work.
- Using the information from the first problem, your variable costs per unit include labor ($18) and parts ($10). Your fixed costs include maintenance of $750, rent and utilities of $2000, and administration costs of $1150. If you have a labor issue and your costs might vary by $2 next month; and you might have a major repair issue that will add $500; and your administrative costs might vary by 10%. Which is the most important issue to focus on? Conduct a sensitivity analysis of the situation and show all of your work.
