To be profitable, a firm must recover its costs. These costs indude both its fixed and its 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 the case of Blue Mouse Manufacturers: Blue Mouse Manufacturers is considering a project that will have fixed costs of $10,000,000. The product will be sold for $41.50 per unit, and will incur a variable cost of $11.25 per unit, Given Blue Mouse's cost structure. It will have to sell units to break even on this project(Q), Blue Mouse's marketing and sales director don't think that the firm's market is big enough for the filem to break wven. In fact, the believes that the firm will be able to sell only about 175,000 unite. However, she also thinks that the demand for Blue Mouse's product is relatively inelastic (so the firm can increase the sales price without significantly decreasing the volume of product sold). Assuming that the firm consell 175,000 units, what price must it set to break even? $68.39 per unit $25.23 per unit 582.07 per unit 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 depreciates its fixed assets more quickly over a shorter life. The product's sales price increases The firm's tax rate increases O When other things are held constant, the higher a firm's operating leverage, the will be its business risk