Question 40729
SEE THE FOLLOWING EXAMPLE
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:
Finance Example – Break Even Analysis.
The break even point for a business is given by the formula:
where:
B = units sold to breakeven point=15000
F = fixed costs=100000
P = price per unit
V = variable costs...500/COPY
a. Suppose EducateComp knows its fixed costs are $100,000, its variable costs are
$500 per copy of AlgeComp, and they must to sell 15000 copies of AlgeComp to
break even the first year. What is the minimum price per unit they should charge?
P*15000=100000+500*15000=7600000
P=7600000/15000=506.67
B) Total revenue is given by the formula TR = FC + TVC + Profit, where:
TR = total revenue=35000*506.67=17733333
FC = fixed costs
TVC = total variable costs=35000*500=17500000
EducateComp’s Sales Department has established a sales goal 35000 units. If
they achieve their sales goal, what will they profit?
TR = FC + TVC + Profit
Profit = TR + FC – TVC=..TAKING THE SALE IS AT BREAKEVEN PRICE
Profit = (units sold)(price per unit) – fixed costs – (units sold)(variable costs) =17733333-100000-17500000=133333