Roadside Inc is fine-tuning a combination flashlight / WiFi hotspot. The new product would sell for $36.15. The variable cost of production would be $12.70 per unit. Setting up production would entail relevant fixed costs of $322,045. The board of directors, citing technical risk, insists that this project cannot go forward unless the new product would earn a return on sales of 14%. Calculate breakeven sales in DOLLARS, meeting the profit target. (Rounding: penny.)
Roadside Inc is fine-tuning a combination flashlight / WiFi hotspot. The new product would sell for $36.15. The variable cost of production would be $12.70 per unit. Setting up production would entail relevant fixed costs of $322,045. The board of directors, citing technical risk, insists that this project cannot go forward unless the new product would earn a return on sales of 14%. Calculate breakeven sales in DOLLARS, meeting the profit target. (Rounding: penny.)
Break even point means a point where firm is neither earning profit nor incurring any loss.
For calculating break even with target profits, we need to have fixed cost , desired profits and Contribution per unit.
Break even in units = Fixed Cost + desired profits / Contribution per unit
Break even in dollars = Fixed cost + desired profits / PV ratio
PV ratio = Contribution *100/sales
Contribution = Sales – Variable Cost
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