What is the cash break-even point

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1. Mop and Broom Manufacturing is evaluating whether to produce a new type of mop. The company is considering the operations requirements for the mop as well as the market potential. Estimates of fixed costs per year are $40,000, and the variable cost for each mop produced is $20. If the company sells the product at a price of $25, how many units of product have to be sold in order to break even?

2. Insourcing incurs an annual fixed cost of $500,000 and a variable cost of $60 per unit. Outsourcing incurs an annual fixed cost of $750,000 and a variable cost of $20 per unit. What is the indifference point between the two alternatives?

3. What is the operating break-even point? Is it the point that the firm does not lose money (positive earnings)? What’s the cash break-even point? What’s the target break-even point?

Reference no: EM131850901

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