Breakeven Volume (In Units) = (Total Fixed Costs) / (Unit Selling Price Unit Variable Cost)

What would be the (a) break-even volume in units (2.5 marks) and (b) break-even sales in dollars (2.5 marks) if a firm set a unit selling price of $600 when total fixed costs is $1,000,000 and variable cost per unit is $400? Calculation steps are required to be shown clearly in your answer without which a zero mark will still be awarded even if the correct answer is presented. Consider yourself cautioned.

For (c)/(d)/(e) Should a profit of $600,000 be made, (c) how would the above formula be modified Present your answer as a complete formula. (2 marks), (d) how would you rename the formula (1 mark) and (e) how many units would you need to sell to make such a profit? (2 marks) Calculation steps are required to be shown clearly in your answer without which a zero mark will still be awarded even if the correct answer is presented. Consider yourself cautioned.

For (f) There are five assumptions upon which the breakeven analysis is based. Two of them are:

(i) All costs are constant over time

(ii) All costs are linear over volume of purchase

- (f)(i)/(ii) Explain with sound academic theories what applies in a real business environment for each of the two assumptions listed. (5 marks 2.5 marks each) Be cautioned that shallow answers such as (i) all costs are not constant over time and (ii) all costs are not linear over volume of purchase, and the sort, will earn you a zero (0) mark.

(g) In terms of pricing strategy, when will you use prestige pricing? (2 marks) Give an example. (1 mark)

(h ) List and explain the one distinct difference between penetration pricing strategy and introductory pricing strategy. (2 marks)