Roadside Inc is fine-tuning a combination flashlight / WiFi hotspot. The new product would sell for $41.24. Variable cost of production would be $14.85 per unit. Setting up production would entail relevant fixed costs of $311,089. 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 18%. 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 $41.24. Variable cost of production would be $14.85 per unit. Setting up production would entail relevant fixed costs of $311,089. 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 18%. Calculate breakeven sales in DOLLARS, meeting the profit target. (Rounding: penny.)
Break even point is that point of sales at which there is a situation of no profit and no loss. But when break even point is calculated at some targeted profit, then company is covering its fixed costs and variable costs and its net income will be equal to target return on sales.
Breakeven Sales = Fixed Costs/(Contribution margin ratio - Target profit ratio)
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