Suppose you have to establish a new company. Suggest in which item or items company should deal. How much sale of the item is required in order to reach at break even point depending on the suggested price of item, production capacity, fixed and variable cost associated with the item? Businesses have to plan for the future. Since equipment breaks down or wears out, business owners have to have the money to replace the equipment. In addition, money might be set aside for retirement benefits for their employees. Suggest if the company need to set aside the lump sum of money that will collect interest or company should purchase annuities. Support your suggestion with argument.

What kind of a company do you want to establish?

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To suggest the item or items a new company should deal with, several factors need to be considered:

1. Market Demand: Identify the products or services with high demand in the market. Conduct market research to understand consumer preferences, trends, and potential competition. Look for gaps in the market that the company can fill.

2. Competitive Advantage: Determine the company's unique selling proposition or competitive advantage. This could be offering superior quality, innovative features, competitive pricing, excellent customer service, or a combination of factors that set the company apart from competitors.

3. Profit Margins: Evaluate the potential profit margins of different products or services. Consider the cost of production, fixed and variable costs, and the suggested selling price of the item. Higher-profit margins indicate a better chance of reaching the break-even point quickly.

4. Production Capacity: Assess the company's production capacity in terms of volume and efficiency to determine if it aligns with the demand for the chosen item. Ensure the production capacity can meet the sales target to reach the break-even point.

To calculate the break-even point, you would need to consider the fixed costs, variable costs, and the selling price of the item:

Break-even quantity = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

For example, if the fixed costs associated with producing a specific item are $50,000, the selling price per unit is $10, and the variable cost per unit is $5, the break-even quantity would be:

Break-even quantity = $50,000 / ($10 - $5) = 10,000 units

This means the company would need to sell 10,000 units of the item to cover all the costs and reach the break-even point.

Regarding setting aside a lump sum of money that will collect interest or purchasing annuities, the decision depends on several factors:

1. Risk Tolerance: Consider the company's risk appetite. Investing in a lump sum that collects interest may involve market risk and fluctuations. Annuities, on the other hand, provide a guaranteed income stream but might have lower returns.

2. Time Horizon: Determine the time frame for which the funds will be set aside. Short-term needs might favor interest-bearing accounts, while long-term goals like retirement benefits could benefit from annuities' regular income stream.

3. Flexibility: Consider the need for flexibility and access to funds. Lump sum investments may provide more liquidity, whereas annuities generally have restrictions on early withdrawals.

4. Financial Objectives: Assess the company's financial goals and long-term plans. Annuities can provide a stable income stream, while interest-bearing accounts allow for potential growth and investment opportunities.

It is recommended to seek advice from a financial professional who can assess the individual circumstances of the company and provide tailored guidance based on the specific needs and goals.