Tom Jones company was producing a record album and wanted some strategic advice on how to make money. They had to make an investment in marketing and did not know whether they can afford it . they needed to know at what point in sales would they cover their costs.

Here is what we know. Cost of manufacturing the record. $1.25

Cost for royalties they had to pay to the artist : $1.00

Commissions on the sale of the record: 5% of sales price

The Advertising Needed to promote the record: $10,000

The recording studio to produce the record: $20,000

The whole sale selling price of each record: $19.95

What is the total variable cost?

What is the variable profit?

What is the variable margin?

How many units do they need to sell to break even?

How many dollar sales do they need to break even?

If they sold 1,000,000 how much profit would they make?