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Professor Corona has an astounding opportunity to invest in the business by acquiring a new fabulous...

Professor Corona has an astounding opportunity to invest in the business by acquiring a new fabulous technology that will allow them to make a new line of astoundingly fabulous chapeaux.  This new fabulous technological investment will come with a cost, however – it will cost $500,000 to purchase.  The new chapeaux that Professor Corona intends to create will be so fabulous that she will charge $125 per chapeau and because the newly acquired technology is so fabulous each chapeau will only cost Prof. Corona $25 to make.  She has decided not to sell directly to customers but to sell her chapeaux to Bloomingdale’s who will then sell them for $250 each.

a. Calculate the break even for this investment.

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Answer #1

New fabulous technological investment cost = $500,000

Sale price to Bloomingdale = $125

Cost Prof.Corona = $25

Break Even for this investment = New fabulous technological investment cost / (Sale price to bloomingdale - Cost Prof. Corona)

= $500,000 / ($125 - $25)

= $500,000 / $100

= 500

Therefore, Break even for this investment is 500 chapeau

Note:

Sale price os bloomingdale is not relevant for this case as this the analysis of investment of preofessor corona

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