How many cars of each type would toyota have sold

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Breakeven Analysis

Toyota will build an auto manufacturing plant in Thailand at an estimated cost of $374.2 Million. In the first few years of operation, its product line will consist of Tercel, Corolla and Camry.

The factory can make 30,000 cars a year at full capacity (any combination of the three cars).

Cost estimates for the product line is as follows:

Material cost/car:

$5000 (Tercel), $7000 (Corolla), $9000 (Camry)

Labor cost per car:
$1400 (Tercel), $2000 (Corolla), $2600 (Camry)

Rebates: 5% of sales

Other promotional expenses: 5% of sales

Administrative costs: $50,000 per month

Toyota's selling price is $16,000 for the Tercel; $20,000 for the Corolla; $24,000 for the Camry

For every Tercel sold, it expects to sell 3 times as many Corollas, and 4 times as many Camrys.

(a) At break-even, how many cars of each type would Toyota have sold?

(b) How soon can Toyota break-even, assuming it can operate at full factory capacity?

Hint: Use the same approach as the Campbell's soup problem - the only difference is that there are now three products.

Verified Expert

As per the requirement of the given assignment, to find the break-even point for the company Toyota by applying contribution margin concept which is the difference between selling price and variable cost of any product. This margin reflects how much of the fixed cost is being covered by selling one single unit.

Reference no: EM131184197

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