1. Break even analysis To be profitable, a firm must recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit, Consider the case of Petrox Oil Co. Petrox Oil Co. is considering a project that will have fixed costs of $10,000,000. The product will be sold for $41.50 per unit, and will incur a variable cost of $12.80 per unit Given Petros cost structure, it will have to sell units to break even on this project (Q. Petrox's marketing and sales director doesn't think that the firm's market is big enough for the firm to break even. In fact, she believes that the firm will be able to sell only about 150,000 units. However, she also thinks that the demand for Petrox's product is relatively indlastic (so the firm con increase the sales price without significantly decreasing the volume of product sold). Assuming that the tim can sell 150,000 units, what price must set to break even? 575.50 per unit $79.47 per unit $95.36 per unit 587.42 per unit What affects the firm's operating break-even point? Several factors affect a firm's operating break-even point. Based on the scenarios descnbed in the following table, indicate whether these factors would increase, decrease, or leave unchanged a firm's break-even quantity-assuming that only the listed factor changes and all other relevant factors remain constant The amount of debt increases, Cusing the firm's total interest expense to increase Increase Decrease No Change The fim depreciates its fixed assets more quickly over a shorter le The products les price increase higher lower When other things are held constant, the higher a firm's operating leverage, the will be its business risk