Question: 1. Break-even analysis Aa Aa E To be profitable, a firm has recover its costs. These costs include both its fixed and its variable costs.

1. Break-even analysis Aa Aa E To be profitable, a firm

has recover its costs. These costs include both its fixed and its

1. Break-even analysis Aa Aa E To be profitable, a firm has 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 Free Spirit Industries Inc.: Free Spirit Industries Inc. is considering a project that will have fixed costs of $12,000,000. The product will be sold for $37.50 per unit, and will incur a variable cost of $12.80 per unit. Given Free Spirit's cost structure, it will have to sell units to break even on this project (QBE) Free Spirit'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 175,000 units. However, she also thinks that the demand for Free Spirit's product is relatively inelastic (so the firm can increase the sales price without significantly decreasing the volume of product sold). Assuming that the firm can sell 175,000 units, what price must it set to break even? $77.30 per unit O $81.37 per unit O $97.64 per unit $89.51 per unit

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

1. Break-even analysis Aa Aa E 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...

Thanks! 3. Break-even analysis Aa Aa E To be profitable, a firm has to recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it...

3. Break-even analysis Aa Aa E To be profitable, a firm has to recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would...

4. Break-even analysis Aa Aa E To be profitable, a firm has to recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would...

Answer choices for the last blank, "leverage, the ... will be its business risk." ( higher / lower) I will make sure to thumbs up if correct. Thank you! 4. Break-even analysis Aa Aa To be profitable,...

Break even Analysis 4. Break-even analysis Aa Aa To be profitable, a firm has to recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what...

1. Break-even analysis Aa Aa To be profitable, a firm has 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 Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be $1.5 million. All sales revenues will be...

A three-month American call option on a stock has a strike price of $20. The stock price is $20, the risk-free rate is 3% per annum, and the volatility is 25% per annum. A dividend of $2 is expected...

A company overstated its liability for warranties by $ 1 0 0 , 0 0 0 . Its tax rate is 2 5 % . As a result of this error, income tax expense is: Multiple Choice Unaffected. Overstated by $ 2 5 , 0 0...

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...