Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dynamic Defenses Corporation is considering a project that will have fixed costs of $15,000,000. The product will be sold for $32.50 per unit, and will

image text in transcribed

image text in transcribed
Dynamic Defenses Corporation is considering a project that will have fixed costs of $15,000,000. The product will be sold for $32.50 per unit, and will incur a variable cost of $11.25 per unit. Given Dynamic Defenses's cost structure, it will have to sell _ 299,712 346,150 138,329 units to break even on this project (Q35). Dynamic Defenses's marketing and sales director doesn't th break even. In fact, she believes that the firm will be able to s- y a-out 200,000 units. However, she also thinks that the demand for Dynamic Defenses'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 200,000 units, what price must it set to break even? irm's market is big enough for the firm to 0 $103.50 per unit 0 $94.88 per unit 0 $81.94 per unit 0 $86.25 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 quantityassuming that only the listed factor changes and all other relevant factors remain constant. Increase Decrease No Change The firm depreciates its fixed assets more quickly over a 0 O 0 shorter life. The variable cost per unit decreases. O o 0 The amount of debt increases, causing the firm's total 0 O 0 interest expense to increase. When a large percentage of a firm's costs are fixed, the firm is said to have a low degree of operating leverage

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jack R. Kapoor, Les R. Dlabay, Robert J. Hughes, Melissa Hart

12th edition

1259720683, 978-1259720680

More Books

Students also viewed these Finance questions