Question
Bright Eyes manufactures and sells two products. The first product is a disposable contact lens set that lasts about 4 months. The second product is
Bright Eyes manufactures and sells two products. The first product is a disposable contact lens set that lasts about 4 months. The second product is a wetting solution. Customers of the first product use one bottle of solution each month. As a result, bottles of solution outsell lens by a 4:1 ratio. Lens sell for $42 per set, and have a contribution margin ratio of 60%. The solution sells for $8 per bottle, but only generates variable costs of $2. The company's total fixed costs are $12,400,000.
(a) What level of total sales is necessary to achieve break even?
(b) If a competitor began selling a wetting solution that forced Bright Eyes to reduce the price for its
solution to $6 (to maintain market share and the 4:1 ratio of solution to lens), what level of total sales is necessary to achieve break even?
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