What is the breakeven point for the number of sports cars

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A company plans to start manufacturing a new sports car which will sell for $50,000. It will replace production of its family saloon car in its factory in Coventry. The fixed costs of the factory are $1,000,000 and each sports car will cost $28,000 to make.

Problem a) What is the breakeven point for the number of sports cars?

Problem b) Market research suggests 100 sports cars can be sold in the first year. The cost of converting the factory is $2,000,000, this is in addition to the fixed costs above. What will be the expected profit in the first year?

Problem c) A new machine costing $10,000 can reduce production cost by $1,000 per car. What effect will this have on the profit in the first year if 100 sports cars are sold?

Reference no: EM132993594

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