Asked by Gisell Dominguez Monreal on May 28, 2024
Verified
Racer Industries has fixed costs of $900,000. The selling price per unit is $250, and the variable cost per unit is $130.
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 to
sponsor the event is $7,200. How many more units must be sold to cover this cost?
Break-even Point
The point at which total costs equal total revenue, meaning the business makes neither a profit nor a loss.
Variable Cost
Costs that change in proportion to the level of production or business activity, such as materials, labor, and utility costs.
Fixed Costs
Costs that do not vary with the level of production or sales, such as rent, salary, or insurance, providing stability to a company's expense structure.
- Identify the break-even point in both units and monetary values, acknowledging its criticality in business strategy development.
- Examine the influence of alterations in sales revenue, operational costs, and pricing strategies on a business's break-even analysis and economic performance.
Verified Answer
SP
Shilvi PatelMay 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
- Identify the break-even point in both units and monetary values, acknowledging its criticality in business strategy development.
- Examine the influence of alterations in sales revenue, operational costs, and pricing strategies on a business's break-even analysis and economic performance.