On your day off you are talking with a friend who mentions that she is looking into starting up a new business venture and wants your input The friend is thinking about starting a small business she read about on the internet The advertisement indicated that you would be your own boss, only need to sell 10 units to breakeven low fixed costs She says that it seems like an easy side gig but admits that she is unsure what breakeven point is or even what a fixed or not fixed (variable ) cost is You indicate that you will do some research and you discover the following cost structure Inventory month $300 Royalty unit $10 Monthly license fee $25 Advertising unit $12 Further information indicates that the owner of the rights insists that you can charge $30 unit, with no ability to modify Required Prepare a memo to your friend to explain breakeven point the difference between fixed variable costs Prepare a breakeven point calculation Also, indicate if the advertisement is correct To further help her, suppose you could charge whatever amount you like, what would you have to charge per unit to breakeven at 10 units sold on a monthly basis (provide a calculation) (maximum 500 words)

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Posted on Sep 16, 2024

On your day off you are talking with a friend who mentions that she is looking into starting up a new business venture and wants

On your day off you are talking with a friend who mentions that she is looking into starting up a new business venture and wants your input. The friend is thinking about starting a small business she read about on the internet. The advertisement indicated that you would be your own boss, only need to sell 10 units to breakeven & low fixed costs. She says that it seems like an easy side gig but admits that she is unsure what breakeven point is & or even what a fixed or not- fixed (variable?) cost is. You indicate that you will do some research and you discover the following cost structure:

Inventory/month: $300
Royalty/unit: $10
Monthly license fee: $25
Advertising/unit: $12

Further information indicates that the owner of the rights insists that you can charge $30/unit, with no ability to modify.

Required:

Prepare a memo to your friend to explain breakeven point & the difference between fixed & variable costs. Prepare a breakeven point calculation. Also, indicate if the advertisement is correct. To further help her, suppose you could charge whatever amount you like, what would you have to charge per unit to breakeven at 10 units sold on a monthly basis (provide a calculation)? (maximum 500 words)