Posted: July 12th, 2016

How many units must be sold if Leslie uses the freight company and she wants to have a profit of $1000?

Leslie Mittelberg is considering the wholesaling of a leather handbag from Kenya. She must travel to Kenya to check on quality and transportation. The trip will cost $3000. The cost of the handbag is $10 and shipping to the United States can occur through the postal system for $2 per handbag or through a freight company which will ship a container that can hold up to a 1000 handbags at a cost of $1000. The freight company will charge $1000 even if less than 1000 handbags are shipped. Leslie will try to sell the handbags to retailers for $20. Assume there are no other costs and benefits.

a. What is the break-even point if shipping is through the postal system?
b. How many units must be sold if Leslie uses the freight company and she wants to have a profit of $1000?