The break-even point in pricing is the point where costs and expenses are equal to revenue....
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The break-even point in pricing is the point where costs and expenses are equal to revenue. A break-even analysis can be performed to help determine the lowest level at which to set a selling price in a region and still break even. Performing this analysis can help to avoid costly mistakes, such as pricing too low and thus losing a large amount of money. The break-even calculation for price, given a projected number of units sold is: break-even price = variable cost + fixed expenses / projected units Variable cost in New Shoes is the unit cost of the product. Fixed costs are the marketing expenses for a region along with the allocated product development expense. Applying the formula with a variable cost of $40 and fixed expenses of $3,500,000, the break-even price for 100,000 units would be: break-even price = $40 + $3,500,000/ 100,000 $40 + $35 = $75 = 1. Using the fixed expenses and projected sales from the example, what would the break-even price be if unit cost is $35? 2. If the break-even price is $75, and your target return on sales is 20%-what is the selling price? The break-even point in pricing is the point where costs and expenses are equal to revenue. A break-even analysis can be performed to help determine the lowest level at which to set a selling price in a region and still break even. Performing this analysis can help to avoid costly mistakes, such as pricing too low and thus losing a large amount of money. The break-even calculation for price, given a projected number of units sold is: break-even price = variable cost + fixed expenses / projected units Variable cost in New Shoes is the unit cost of the product. Fixed costs are the marketing expenses for a region along with the allocated product development expense. Applying the formula with a variable cost of $40 and fixed expenses of $3,500,000, the break-even price for 100,000 units would be: break-even price = $40 + $3,500,000/ 100,000 $40 + $35 = $75 = 1. Using the fixed expenses and projected sales from the example, what would the break-even price be if unit cost is $35? 2. If the break-even price is $75, and your target return on sales is 20%-what is the selling price?
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Related Book For
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson
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