Sample Essay

Further, it can be assumed that the company does not have to produce each of the above products independently but has to do production of both of them to cater for the costs. This will mean that the fixed cost of the company will be catered for by the production of both of the products implying that each of the products will have to cater for $2,500 million costs. This will mean that the pieces of each brand produced will have to be reduced as follows;

Fixed cost (millions) Per unit revenue Per unit variable cost Revenue-variable cost Break even
$2,500 737- $70 $35 $35 66 million
$2,500 787- $190 $100 $90 28 million

This means that by producing 66 million pieces of 737 brand as well as producing 28 million pieces of the 787 brand will be able to cater for both the variable costs of each and the fixed cost of $5,000.

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