Break-Even Analysis The general formula for calculating break-even units is Break-even Units = Total Fixed Costs / (Unit Selling Price - Unit Variable Cost) In StratSim total fixed costs can be broken into discretionary marketing expenditures as well as fixed costs for plant and overhead. The selling price is the MSRP less the dealer discount, and the cost of materials and labor make up the variable cost. In this assignment you will allocate fixed costs across a portfolio of products and calculate the break-even units for each product. A firm's production capacity is 1.4 million units, with annual fixed costs of $2.2 billion for depreciation, plant maintenance, corporate marketing, and general overhead. Additional values for the three vehicles produced and sold by the firm are shown in the table below: Vehicle X Vehicle Y Vehicle Z MSRP $11,800 $19,000 $44,300 Dealer Discount 8% 13% 14% Variable Cost $8,300 $11,600 $27,900 Advertising & Promotion $38,000,000 $74,000,000 $99,000,000 Previous Unit Sales 500,000 400,000 300,000 QUESTION 2 What impact does a 10% drop in MSRP have on the break-even point for each vehicle? Break-Even Units 0 Vehicle X units 0 Vehicle Y units 0 Vehicle Z units
Break-Even Analysis The general formula for calculating break-even units is Break-even Units = Total Fixed Costs / (Unit Selling Price - Unit Variable Cost) In StratSim total fixed costs can be broken into discretionary marketing expenditures as well as fixed costs for plant and overhead. The selling price is the MSRP less the dealer discount, and the cost of materials and labor make up the variable cost. In this assignment you will allocate fixed costs across a portfolio of products and calculate the break-even units for each product. A firm's production capacity is 1.4 million units, with annual fixed costs of $2.2 billion for depreciation, plant maintenance, corporate marketing, and general overhead. Additional values for the three vehicles produced and sold by the firm are shown in the table below: Vehicle X Vehicle Y Vehicle Z MSRP $11,800 $19,000 $44,300 Dealer Discount 8% 13% 14% Variable Cost $8,300 $11,600 $27,900 Advertising & Promotion $38,000,000 $74,000,000 $99,000,000 Previous Unit Sales 500,000 400,000 300,000 QUESTION 2 What impact does a 10% drop in MSRP have on the break-even point for each vehicle? Break-Even Units 0 Vehicle X units 0 Vehicle Y units 0 Vehicle Z units
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Break-Even Analysis
The general formula for calculating break-even units is
Break-even Units = Total Fixed Costs / (Unit Selling Price - Unit Variable Cost)
In StratSim total fixed costs can be broken into discretionary marketing expenditures as well as fixed costs for plant and
overhead. The selling price is the MSRP less the dealer discount, and the cost of materials and labor make up the variable cost.
In this assignment you will allocate fixed costs across a portfolio of products and calculate the break-even units for each product.
A firm's production capacity is 1.4 million units, with annual fixed costs of $2.2 billion for depreciation, plant maintenance,
corporate marketing, and general overhead. Additional values for the three vehicles produced and sold by the firm are shown in
the table below:
Vehicle X
Vehicle Y
Vehicle Z
MSRP
$11,800
$19,000
$44,300
Dealer Discount
8%
13%
14%
Variable Cost
$8,300
$11,600
$27,900
Advertising & Promotion
$38,000,000 $74,000,000 $99,000,000
Previous Unit Sales
500,000
400,000
300,000
QUESTION 2
What impact does a 10% drop in MSRP have on the break-even point for each vehicle?
Break-Even Units
0
Vehicle X
units
0
Vehicle Y
units
0
Vehicle Z
units
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