Break even analysis

1. Break-even analysis To be profitable, a firm must recover its costs. These costs include both its fixed and its variable costs. One way that ofirm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Blue Mouse Manufacturers: Brue Mouse Manufacturers is considering a project that will have fixed costs of $10,000,000. The product will be sold for $32.50 per unit, and will incur a variable cost of $12,00 per unit. Given thie Mouse's cost structure, it will have to sell units to break even on this project (QaE). Blue Mouneh marketing and sales director doesnt think that the firmy market is big enough for the firm to break even. in fact, she belleves that the Firm will be able to sell only about 150,000 units. However, she also thinks that the demand for Blue Mouse's product is relatively inelastic (so the firm can increase the sales price without significhatly decreasing the volume of product sold). Assuming that the firm can sell 150,000 units, what price munt it set to break even? 65. 36 per unit 507,42 per unit 875.50 per unit $79.47 per unit What affects the firm's operating break-even point? Severai fectors affect a firmis eperating break-even point. Based on the scenarios described in the folowing table, indicate whether these factors would increase, decrease, or lenve unchanged a firmis break-even quantity-aswming that only the liated factor changes and all other relevant factors remein canstant. iven Blue Mouse's cost structure, it will have to sell units to break even on this project (QBE). lue Mouse's marketing and sales director doesn't think that the firm's market is big enough for the firm to break even. In fact, she believes that the irm will be able to sell only about 150,000 units. However, she also thinks that the demand for Blue Mouse's product is relatively inelastic (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 price must it set to break even? $95.36 per unit 507.42 per unit $75.50 per unit $79,47 per unit What affects the firm's operating break-even point? Several factors affect a firm's operating break-even point, Based on the scenarios described in the following table, indicate whether these factors would increase, decrease, or leave unchanged a firm's break-even quantity-assuming that only the listed factor changes and all other relevant factors remain constant. When a large percentage of a firm's costs are foxed, the firm is said to have a degree of operating leverage