Luke's Lightsabre Inc. is a new business that is looking to sell custom crafted light sabres. Luke believes that he can sell the light sabres for $500 each His market research has told him that there is annual demand of 200,000 light sabres Luke projects that his "Force-enabled" light sabres will achieve a 6% market share His fixed costs will be $1,500,000 per year [ 15 marks - 5 marks each ]

a) What does his contribution margin, as a % of sales, need to be in order to break-even.

b) If his variable operating costs were $20 per unit and he paid a selling commission of 10% of the selling price, what would his break-even cost of goods sold be if he achieves a 6% market share?

c) Assuming Luke's Costs and selling price remain the same as determined from above, what would his annual sales revenue need to be If he wanted to make 15% of sales in profit?

Answer rating: 100% (QA)

Lukes Lightsabre Inc Breakeven and Profitability Analysis a Contribution Margin for Breakeven To bre... View the full answer