Answer:
$8,666,775
Explanation:
Given that,
Variable costs per unit = $250
Maximum price MM could charge = $325
Fixed costs = $20,000,000
Depreciation expense = $2,500,000
Worst case sales unit = 240,000
Let the break even be x,
Total cost at break even:
= Fixed costs + (Variable costs per unit × No. of units)
= $20,000,000 + 250x
Total Revenue at break even:
= Sales price × No. of units at break even
= 325x
Revenue = Cost at break even
325x = 250x + $20,000,000
325x - 250x = $20,000,000
75x = $20,000,000
x = $20,000,000 ÷ 75
= 266666.67 or 266,667
Since break even unit is more than worst case sales unit the sales will fall short by:
= Break even units - Worst case sales unit
= 266,667 - 240,000
=26,667 units i.e by
= 26,667 × $325
= $8,666,775