Jane is planning to expand her business by taking on a new product. She can purchase the new product at a cost of $2 per unit. To market this new product, she would need to spend $1250 on advertising each month. She is not sure how she should price her product and is asking for your help. If she chooses a price of $14.5 per unit, what will be the break-even point in sales dollars? Note: to receive the full mark, you will use 8 decimal places when performing the calculations, and there is no need to put dollar sign ($) or comma (,) in your final answer. You may leave 8 decimals in your final answer if you wish to do so.

Question

BlackTom AI · Accepted Answer

We start by identifying the key financial numbers involved in the problem. The fixed monthly advertising cost is 1250, which does not change with the number of units sold. The variable cost per unit to produce the product is 2 dollars. The selling price per unit is 14.5 dollars.

Next, we determine the contribution per unit, which is the amount each unit contributes toward covering fixed costs and profit after variable costs are paid. Contribution per unit = price per unit - variable cost per unit = 14.5 - 2 = 12.5.

To reach the break-even point in units, we divide the total fixed costs by the contribution per unit: break-even units = fixed costs / contribution per unit = 1250 / 12.5 = 100.00000000 units. Here we keep the calculation with exact arithmetic, which yields exactly 100 units.

Finally, we convert the break-even units into sales dollars by multiplying by the selling price per unit: break-even sales dollars = break-even units * price per unit = 100.00000000 * 14.5 = 1450.00000000.

Therefore, the break-even point in sales dollars, staying consistent with eight decimal places, is 1450.00000000. (Note: the problem allows leaving eight decimals, and there is no need to include a dollar sign or comma in the final numeric answer.)

BUQU 1130 R10 SPRING 2025 Try Some Exercises (Ch.5) - Not for marks

View Explanation

Log in for full answers

Similar Questions

Question textA business sells a product for $250. Variable costs are $100 per unit and total fixed cost are $120,000. How many products business need to sell to break-even? Answer 1 Question 3[input] products

Profit alone Blank ______ how many units should be sold before a firm breaks even.

What term describes the point at which the number of units sold generates enough revenue to equal total costs?

At the break-even point, profits on the sale of a product are Blank ______.

How do managers use break-even analysis?

You decide to start selling hypercars. You figure it will take $100,000,000 to start a factory. You plan to sell your cars for $2,000,000 each. Each car will cost about $1,000,000 to make. Your break-even point is:

TB MC Qu. 09-28 An example of goal-seek analysis... An example of goal-seek analysis is determining

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler