Asked by Dillon Bannister on Jul 27, 2024
Verified
Racer Industries has fixed costs of $900,000. Selling price per unit is $250, and variable cost per unit is $130.
Required
(a) How many units must Racer sell in order to break even?
(b) How many units must Racer sell in order to earn a profit of $480,000?
(c) A new employee suggests that Racer Industries sponsor a 10K marathon as a form of advertising. The cost tosponsor the event is $7,200. How many more units must be sold to cover this cost?
Break-Even
The point at which total costs equal total revenues, resulting in no net loss or gain for a business.
Variable Cost
Costs that vary directly with the level of production or volume of output.
Fixed Costs
Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums, providing a basis for operational planning.
- Ascertain the break-even positions in terms of quantity and currency for cases involving solitary or multiple commodities.
- Implement principles of variable and fixed expenses to determine sales needed to reach specified profit goals.
- Analyze the effects of advertising and promotional activities on the break-even point and profitability.
Verified Answer
SD
Soyeb DungariaJul 31, 2024
Final Answer :
?(a) $900,000/ ($250 - $130) = 7,500 units
(b) ($900,000 + $480,000)/ ($250 - $130) = 11,500 units
(c) $7,200/ ($250 - $130) = 60 units
(b) ($900,000 + $480,000)/ ($250 - $130) = 11,500 units
(c) $7,200/ ($250 - $130) = 60 units
Learning Objectives
- Ascertain the break-even positions in terms of quantity and currency for cases involving solitary or multiple commodities.
- Implement principles of variable and fixed expenses to determine sales needed to reach specified profit goals.
- Analyze the effects of advertising and promotional activities on the break-even point and profitability.