Question: Petrox Oil Co, is considering a project that will have fixed costs of $15,000,000. The product will be sold for $32.50 per unit, and will
Petrox Oil Co, is considering a project that will have fixed costs of $15,000,000. The product will be sold for $32.50 per unit, and will incur a variable cost of $12.80 per unit. Given Petrox's cost structure, it will have to sell 761,421> units to break even on this project (QmB). 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 inelastic (so the firm can increase the sales price without significantly decreasing the volume of product sold). Assuming that the firm can sell 150,000 units, what price must it set to break even? $135.36 per unit $112.80 per unit $124.08 per unit $107.16 per unit
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