Computation of fixed operating cost and breakeven sales

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Reference no: EM1310234

A recent business school graduate plans to open a wholesale dairy products firm. The business would be completely financed through equity. He expects the first year sales to total $5,500,000. He desires to earn a target pretax profit of 1,000,000 during his first year of operation. Variable costs are 40% of sales. How large can his fixed operating cost be if he is to meet his profit target? What is his breakeven level of sales at the level of fixed operating costs determined in (a)?

Reference no: EM1310234

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