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To be profitable, a firm has recover its costs. These costs include both fixed and variable costs. One way that a firm evaluates at what
To be profitable, a firm has recover its costs. These costs include both fixed and variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider this case: Nordyne Inc. is considering a project that will have fixed costs of $10,000,000. Its sale price will be $41.50 per unit, and it will have a variable cost per unit of $12.80. Therefore, Nordyne Inc. has to sell ____ units to break even on this project (Q_BE). Nordyne 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 firm will be able to sell only about 200,000 units. However, she also thinks the demand for Nordyne Inc.'s product is relatively inelastic, so the firm can increase the sale price. Assuming that the firm can sell 200,000 units, what price must it set to meet the CFO's EBIT goal of $20,000,000? $203.50 $187.22 $162.80 $170.94 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 a firm's break-even quantity, decrease the break-even quantity, or lead to no change. When other things are held constant, the higher a firm's operating leverage, the _____ will be its business risk
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