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Free Spirit Industries Inc. is considering a project that will have fixed costs of $12,000,000. The product will be sold for $41.50 per unit, and
Free Spirit Industries Inc. is considering a project that will have fixed costs of $12,000,000. The product will be sold for $41.50 per unit, and will incur a variable cost of $12.80 per unit. Given Free Spirit's cost structure, it will have to sell units to break even on this project (QBE) Free Spirit Industries Inc.'s marketing sales director doesn't think that the market for the firm's goods is big enough to sell enough units to make the company's target operating profit of $20,000,000. In fact, she believes that the fim will be able to sell only about 175,000 units. However, she also thinks the demand for Free Spirit Industries Inc.'s product is relatively inelastic, so the firm can increase the sale price. Assuming that the firm can sell 175,000 units, what price must it set to meet the CFO's EBIT goal of $20,000,000? O $244.58 O $225.01 O $205.44 O $195.66 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. Increase Decrease No Change The firm's fixed costs increase. The product's sales price increases The amount of debt increases, causing the firm's total interest expense to increase. When other things are held constant, the higher a firm's operating leverage, the will be its business risk
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