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 $$10,000,000.$ The product will be sold for $$32\mathrm{.}50$ per unit, and will incur a variable cost of $$11\mathrm{.}25$ per unit.

Given Blue Mouse's cost structure, it will have to sell units to break even on this project $(Q_{BE}).$

Blue Mouse Manufacturers'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 $$20,000,000.$ In fact, she believes that the firm will be able to sell only about $175,000$ units. However, she also thinks the demand for Blue Mouse Manufacturers's product is relatively inelastic, so the firm can increase the sale price. Assuming that the firm can sell $175,000$ units, what price must it set to meet the CFO's EBIT goal of $$20,000,000?$

$$210\mathrm{.}08$ per unit

$$182\mathrm{.}68$ per unit

$$228\mathrm{.}35$ per unit

$$191\mathrm{.}81$ 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.

$\backslash$table$[[,$Increase Decrease No Change,$],[$The product's sales price increases.,$0,0],[$The amount of debt increases, causing the firm's total interest expense to increase.,$0,0],[$The firm's fixed costs increase.,$0,0]]$

When a large percentage of a firm's costs are fixed, the firm is said to have a degree of operating leverage.