Fry Appliances has the following cost and revenue estimates for its new Hewlett Packard (hp)...

Question:

Fry Appliances has the following cost and revenue estimates for its new Hewlett Packard (hp) laptop touchscreen model:

Fixed cost =$2.8million per year

Cost per unit =$395

Revenue per unit = $550

a) Write the total of relation

b) Determine the annual quantity needed to break even.

c) Determine the annual quantity needed to make a profit of $0.04million.

Break-even Analysis

Break-even analysis is to find the number of units of output that will pay the firm's fixed cost and yield a profit of zero. Of course, a firm wants to maximize its profit but the breakeven analysis gives management an idea of the volume of sales that are needed to break even.

Answer and Explanation:


Answer to a)

The relation is BEQ = FC / (P - AVC)

Where:

  • BEQ = Breakeven Quantity
  • FC = Fixed Cost
  • P = Price
  • AVC = average variable cost.


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Using Break-Even Analysis to Evaluate a Marketing Plan

from UExcel Principles of Marketing: Study Guide & Test Prep

Chapter 3 / Lesson 4
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