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Break-even Assignment
Often a firm will calculate the break-even point for a price. That is, if we set the price at $X, then how many units will we need to sell to cover costs (that is, our break-even point). Work through the following data and questions to gain a better understanding of this approach.
QUESTIONS
1. Start by completing the above table under the assumption that the product will be sold for $30. (It will be easiest to use Excel to complete the table.) How many units need to be sold to break-even at a product price of $30?
2. Now recalculate the table under the assumption that the product will be sold for $15. How many units need to be sold to break-even at a product price of $15?
3. What do you think you would set first: the sales target or the price? Why?
No. of Units
Allocated Fixed Costs
Variable Cost/Unit
Total Production
Cost
Average Unit Cost
Unit Price
Total Sales Revenue
Gross Profit
500
$10,000
$10
1,000
1,500
2,000
2,500
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