1. Break-even analysis To be profitabie, a firm. must recover its costs. These costs inciude both its foced and its variable costi, One way that a firm evaluates at whut stage in would recover the Invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to eazn at profit. Consider the case of Petrox Oil Co.: Petrox Oil Co. Is considering a project that wil have fixed costs of $15,000,000. The product will be seld for $37.50 oer unit, and will incur a variable cost of $10.75 per unit. Given Petrox's cost structure, it will have to sell units to break even on this project (Qee). Petrox's marketing and sales director doesn't think that the firm's market is big enaugh for the firm to break even. In fact, she believes that the fint will be able to sell only about. 150,000 units. However, she also thinks that the demand for petrox's aroduct is relatively inelastie (so the firm can increase the sales price without significantly decreasing the volume of product sold). Assuming that the firm can sell 150,000 units, what grice must it set to break even? $110.75 per unit $105.21 per unit $132.90 per unit $121:83 per unit $110.75 per unit: $105.21 per unit $132.90 per unit $121.83 per unit What affects the firm's operating break-even point? Several foctors affect a firm's operating break-even point. Based on the scenarios described in the following table, indicate whether these factis would increase, decrease, or leave unchangect a firm's break-even quantity-assuming that only the listed factor changes and all other rejevant factars remain constant. When a large percentage of a firm's costs are fixed, the firm is said to have a degree of operating leverage