Assume that you and your friend have decided to go into business together manufacturing your personally designed women’s handbags. You know that your fixed costs (rent on a building, equipment and so on) will be

€120,000 a year. You expect your variable costs to be €28 per handbag.

a. If you plan on selling the handbags to shops for €35, how many must you sell to break even; that is, what is your break-even quantity?

b. Assume that you and your partner feel that you must set a goal of achieving a €50,000 profit with your business this year. How many units would you have to sell to make that amount of profit?

c. What if you feel that you will be able to sell no more than 10,000 handbags? What price will you have to charge to

(i) break even and (ii) to make €50,000 in profit?