EXERCISE4 RGF Manufacturing makes a product that currently sells for $20 each. The Variable Costs are $12 per unit. Fixed Costs total $800,000 per year. How many units must be sold to break even? Fixed Costs UCM Breakeven in Units units What will the company's sales revenue be at the breakeven point? Breakeven Units x Unit Sales PriceBreakeven in Dollars units x S NOTE: This could've also been calculated as: Fixed Costs/Contrib Margin Ratio Assume that the company's current sales are $2.6 million (130,000 units) per year. Calculate the company's Margin of Safety: Page 3 of 6 1) In Units 2) In Dollars ) As a % of Total Sales Assume that one of RGF's major competitors has a Margin of Safety of 35%, more recession proof? which company is RGF's sales may drop % before incurring an operating loss. The competitor's sales may drop by% % before incurring an operating loss. Is RGF or the competitor is more recession proof? Pricina Strateav: Companies typically use one of two strategies when pricing its products. Target Pricing (Costing): Used in competitive environments. This approach assumes that market forces largely set the price. So, the company must engineer their cost structure to compete Plus Assumes that the company has almost complete control of the price of the product. So, a profit is simply added to the unit cost to arrive at the price