Question

Typewritten answers only, no handwritten answers!

NewCar Inc plans to sell a new model auto kit to dealers at $8,000 per car. The consumer assembles the car in approximately 4 hours. Below is additional information on the project.

NewCar Inc's investment in the project $1,000,000.00 (one million dollars).

Material cost per car $5,000

Labor cost per car $ 1,000

Factory Overheard $ 200,000

Distribution (delivery) per car $ 500

Advertising $20,000

Manufacturer’s suggested retail price $10,000

Based on pieces of information in your possession, calculate the following:

Break-even volume? (10 points)

Typewritten answers only, no handwritten answers!

Answer 1

Break-even volume = Total Fixed Cost/ Contribution per unit

Now, Contribution per unit = Selling price per unit - Variable cost per unit

= $8,000-$(5000+1000+500)

= $1500

Total Fixed Cost = $(2,00,000+20,000)

= $ 2,20,000

Therefore, break-even volume = $2,20,000/$1,500

= 146.67 cars