Breakeven price for the toy truck

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Reference no: EM136717

Q. A toy manufacturer launched a new toy truck Last year, which was a huge success. $2.5 million invested by company for a plastic injection molding machine (which can be sold for $2 million) and $100,000 in plastic injection molds especially for the toy (not valuable to anyone else). Labor as well as cost of materials essential to make each truck is about $3. A competitor has developed a similar toy this year, which has significantly reduced demand for the toy truck. At present, the original manufacturer is deciding either they should continue production of toy truck. If estimated demand is 100,000 trucks, what is the breakeven price for the toy truck? Should you shut down?

Reference no: EM136717

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