Multiple-Level Break-Even Analysis

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

Unit-level costs$0.02 per sales dollar

Sales-level costs$100 per sales order

Customer-level costs$800 per customer per year

Facility-level costs$60,000 per year

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

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

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

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

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

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