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 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)
- BEQ = Breakeven Quantity
- FC = Fixed Cost
- P = Price
- AVC = average variable cost.
See full answer below.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from UExcel Principles of Marketing: Study Guide & Test PrepChapter 3 / Lesson 4