Question

Your uncle is considering investing in a new company that will produce high quality stereo speakers. The sales price would be set at 1.70 times the variable cost per unit; the variable cost per unit is estimated to be $75.00; and fixed costs are estimated at $1,170,000. What sales volume would be required to break even, i.e., to have EBIT

Answer 1

Answer:

The sales volume would be required to break even is $22,285

Explanation:

In order to calculate the sales volume would be required to break even we would have to calculate the following:

Breakeven sales = Fixed cost/contribution per unit

fixed costs are estimated at $1,170,000

contribution per unit=selling price per unit - variable cost per unit

selling price per unit=1.70*$75

selling price per unit=$127.50

Hence, contribution per unit=$127.50-$75

contribution per unit=$52.50

Therefore, Breakeven sales =$1,170,000/$52.50

Breakeven sales =$22,285