Multiple-Level Break-Even Analysis

Kucera Associates provides marketing services for a number of small manufacturing firms. Kucera receives a commission of 10 percent of sales. Operating costs are as follows:

Unit-level costs $0.05per sales dollar

Sales-level costs $400 per sales order

Customer-level costs $1,000 per customer per year

Facility-level costs $75,000

a) Determine the minimum order size in sales dollars for Kucera to break even on an order.

b) Assuming an average customer places five orders per year, determine the minimum annual sales required to break even on a customer.

c) What is the average order size in (b)?

d) Assuming Kucera currently serves 100 customers, with each placing an average of five orders per year, determine the minimum annual sales required to break even.

e) What is the average order size in d)?