Login or Sign Up
Menu
Ask a New Question

The Oliver Company plans to market a new product. Based on its market studies, Oliver estimates that it can sell up to 4,500 units in 2005. The selling price will be $2 per unit. Variable costs are estimated to be 20% of total revenue. Fixed costs are estimated to be $6,400 for 2005. How many units should the company sell to break even?

How do I calculate the units to break even? What type of formula do I use?

revenue = units * price/unit

r = 2x for x units

var cost = .2r
fix cost = 6400

total cost c = 6400 + .2(2x)
total revenue = 2x

breakeven when cost = revenue
2x = 6400 + .4x
1.6x = 6400
x = 4000

so, at 4000 units,

revenue = 8000
cost = 6400 + .2(8000) = 8000

Yes

Assignment

Well, to break even, the company needs to cover all its costs, meaning that its total revenue should be equal to its total costs. In this case, we can calculate the break-even point using the formula:

Break-even point (in units) = Fixed costs / (Selling price per unit - Variable cost per unit)

In this case, the fixed costs are given as $6,400, the selling price per unit is $2, and the variable costs are 20% of total revenue, which we can calculate as 20% * Selling price per unit.

So, substituting the values into the formula, we have:

Break-even point = $6,400 / ($2 - (0.20 * $2))

Now, let's do the math and find out the answer.

To calculate the number of units that the company needs to sell in order to break even, you can use the formula for break-even analysis. The formula is as follows:

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

In this case, for the Oliver Company, the fixed costs are $6,400, the selling price per unit is $2, and the variable costs as a percentage of total revenue are 20%.

First, let's calculate the variable cost per unit:
Variable Cost per Unit = Selling Price per Unit * Variable Costs percentage
= $2 * 0.2
= $0.4

Now we can substitute the values into the formula:
Break-even quantity = $6,400 / ($2 - $0.4)
= $6,400 / $1.6
= 4,000 units

Therefore, the Oliver Company needs to sell 4,000 units in order to break even.

XYZ Company plans to market a new product.Based on its market studies,the company estimates that it can sell 5500 units in 2004.The selling price will be birr 2 per unit.Variable costs are estimated to be 40% of the selling price.Fixed costs are estimated to be $ 600 A)Develop the revenue,cost and profit functions interms of sales and quantity B) What is the break even point in units and in birr? C) If the company faces a loss of 4000 birr what will be the sales? D)Support your answer using the break-even chart (Show all the necessary lines and points E) If the company is sure of selling 5500 units every year,Determine the least price that should be charged in order to guarantee no loss.