Break$-$Even Analysis

The general formula for calculating break$-$even units is

Break$-$even Units $=$ Total Fixed Costs $/($Unit Selling Price $$ Unit Variable Cost$)$

In StratSim total fixed costs can be broken into discretionary marketing expenditures as well as fixed costs for plant and overhead. The selling price is the MSRP less the dealer discount, and the cost of materials and labor make up the variable cost. In this assignment you will allocate fixed costs across a portfolio of products and calculate the break$-$even units for each product.

A firm$$s production capacity is $1\mathrm{.}6$ million units, with annual fixed costs of $$2\mathrm{.}8$ billion for depreciation, plant maintenance, corporate marketing, and general overhead. Additional values for the three vehicles produced and sold by the firm are shown in the table below:

Vehicle X Vehicle Y Vehicle Z

MSRP $$11,600$ $$24,400$ $$39,900$

Dealer Discount $9\%12\%14\%$

Variable Cost $$9,000$ $$15,100$ $$23,500$

Advertising & Promotion $$36,000,000$ $$62,000,000$ $$105,000,000$

Previous Unit Sales $600,000500,000300,000$

Question $1$

b$.$ Calculate the fixed costs for each product. For fixed costs that are not directly attributable to particular products, allocate the costs based on previous unit sales.

Vehicle X Vehicle Y Vehicle Z

Fixed Costs $

c$.$ Use your calculations of fixed costs and dealer invoice to compute break$-$even units for each vehicle.