To be profitable, a firm must recover its costs. These costs include both its fixed and...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
To be profitable, a firm must recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Blue Mouse Manufacturers: Blue Mouse Manufacturers is considering a project that will have fixed costs of $10,000,000. The product will be sold for $37.50 per unit, and will incur a variable cost of $10.75 per unit. B Given Blue Mouse's cost structure, it will have to sell units to break even on this project (QBE). Blue Mouse Manufacturers's marketing sales director doesn't think that the market for the firm's goods is big enough to sell enough units to make the company's target operating profit of $15,000,000. In fact, she believes that the firm will be able to sell only about 175,000 units. However, she also thinks the demand for Blue Mouse Manufacturers's product is relatively inelastic, so the firm can increase the sale price. Assuming that the firm can sell 175,000 units, what price must it set to meet the CFO's EBIT goal of $15,000,000? O $192.01 per unit O $153.61 per unit O $161.29 per unit O $176.65 per unit To be profitable, a firm must recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Blue Mouse Manufacturers: Blue Mouse Manufacturers is considering a project that will have fixed costs of $10,000,000. The product will be sold for $37.50 per unit, and will incur a variable cost of $10.75 per unit. B Given Blue Mouse's cost structure, it will have to sell units to break even on this project (QBE). Blue Mouse Manufacturers's marketing sales director doesn't think that the market for the firm's goods is big enough to sell enough units to make the company's target operating profit of $15,000,000. In fact, she believes that the firm will be able to sell only about 175,000 units. However, she also thinks the demand for Blue Mouse Manufacturers's product is relatively inelastic, so the firm can increase the sale price. Assuming that the firm can sell 175,000 units, what price must it set to meet the CFO's EBIT goal of $15,000,000? O $192.01 per unit O $153.61 per unit O $161.29 per unit O $176.65 per unit
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
The Cano Company is decentralized, and divisions are considered investment centers. Cano has one division that manufactures oak dining room chairs with upholstered seat cushions. The Chair Division...
-
Refer to the data in Short Exercise 3-10. Requirement 1. Compute Famous Cuts net income for the year ended December 31, 2012.
-
What are the common types of damping?
-
In 2004, McDonalds reported that its sales in Europe exceeded its sales in the United States for the first time. This result, while reflective of the companys phenomenal success in Europe, was also...
-
Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two companies report the following balances for the year ending December 31, 2011: On January 1, 2011, Highlight acquired on the...
-
Filer Manufacturing has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond issues outstanding. The first...
-
Brendon, the owner of Medical Testing Corp is interested in adopting a retirement plan.He does not have experience in this area, but he has been "reading up" on options.He has come to you to provide...
-
Write C program that will prompt the user for an integer n. If the user has entered a non-integer, the user must be prompted again until he or she enters an integer. If he enters non-integer numbers...
-
A bond matures in 4 years and pays a 5 . 0 0 % annual coupon. The bond has a face value of $ 1 , 0 0 0 and currently sells for $ 9 7 0 . What is the bonds current yield?
-
Hi Expert, Please help me with providing a html, css and (if needed) Java script code for the desing below. Requirement: - I need the design to exactly be as the pic below - When hovering with the...
-
4. (8 points) Determine if each of the integrals below is an improper integral. If it is not improper, just write not improper. If it is improper, write it as a limit or sum of limits. Do not...
-
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five- year period. His annual pay raises are determined by his division's...
-
Brownstone Quarries is a U.S. company with mining operations worldwide.The Companyearns income inboth the U.S., Canada, and South Africa.The U.S. follows a worldwide tax system;Canada and South...
-
You are maintaining a subsidiary ledger account for Police-Training Expenditures for 2013. The following columns are used: Inventory purchases are initially recorded as expenditures. Record the...
-
An Euler circuit that visits every vertex _______________ a Hamilton cycle. Fill in the blank with is or is not to make the statement true.
-
Unlike in a Hamilton cycle, the vertex where the Hamilton path begins is _______________ the vertex where the Hamilton path ends. Fill in the blank with the same as or different from to make the...
-
Every cycle _______________ a circuit. Fill in the blank with is or is not to make the statement true.
Study smarter with the SolutionInn App