Assume that the following data has been determined for the development and sale of a new...
Assume that the following data has been determined for the
development and sale of a new digital thermometer for home
use.
Development cost $480,000,
Sales volume 20,000 units per year,
Sales lifetime 3 years,
Production costs per unit $5
The sale price necessary to break even within two years is:
A) $6
B) $11
C) $5
D) $17
E) none of the other answers are correct
Homework Answers
SALES VOLUME PER YEAR = 20000
BREAK EVEN NEEDED IN 2 YEARS, SO TOTAL BREAK EVEN SALES = 20000 X 2 = 40000 UNITS
BREAK EVEN POINT = DEVELOPMENT COST/(SELLING PRICE - VARIABLE COST)
40000 = 480000/(SELLING PRICE - 5)
SELLING PRICE - 5 = 480000/40000 = 12
SELLING PRICE = 17
ANSWER : D: $17 (Thumbs up please)
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