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Devin, the CEO of a manufacturing company, decided to expand the product offering of his business to include the manufacture of a specialized automotive unit. To include this product, his business would incur fixed costs of $140,000 per year and variable costs of $760 per unit. He plans to sell each unit for $1,240.
Problem a. Calculate the number of units he would have to manufacture to break even.
Problem b. While manufacturing the unit, he realized that he required an additional fixed cost of $3,000 per year was required, and also realized that to be more competitive in the market he had to reduce the selling price by 10%. Calculate the new break-even quantity.
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