Question

Product X is sold to wholesalers for $2.16 and sold to end consumers for $5.94. The size of the market is $420,000,000 annually (based on retail sales); product Y’s share (in dollars) of this market is 17.3%. The fixed costs involved in manufacturing Product Y are $1,400,000 and the variable manufacturing costs are $0.86 per unit. The advertising budget for Product Y is $1,200,000. Miscellaneous variable costs (e.g., shipping and handling) are $0.12 per unit. Product manager’s salary and expenses are $120,000.

What is Product X’s break-even volume?

Answer 1

Fixed cost	1,400,000
Variable cost	0.86	per unit
Advertising cost	1,200,000
Misc variable cost	0.12	per unit
Manager salary	120,000
Total Fixed cost	2,720,000
Total variable cost	0.98
Sale Price	5.94
Contribution per unit	4.96
Breakeven volume	2720000/4.96
Breakeven volume	548,387.10	Units