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question for my marketing class?
Chambers Company has collected estimates for conducting a breakeven analysis for a new product. Variable costs are $7 per unit. The additional plant will cost $48,000.
The new product will be charged $18,000 a year for its share of general overhead.
Advertising expenditures will be $80,000 and $50,000 will be spent on distribution.
1. If the product sells for $12, what is the breakeven point in units?
2. What is the breakeven point in dollar sales volume?
1 Answer
- ibLv 41 decade agoFavorite Answer
Suppose x is the number of units need to be sold to break even.
So the total cost::
7x + 48000 + 18000 + 80000 + 50000
= 7x + 196000
To break even: the total cost should be equal to the product of sell price per item and number of items
7x + 196000 = 12x
5x = 196000
x = 196000/5
x = 39200
So 39200 units needs to be sold at $12 per unit to break even
Therefore the breakeven point in dollar sales volume =
7*39200 + 196000 = 470400