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    Calculating BEP and total profit in the given case

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    RAZ, Inc. is considering launching a project for a 1 week sale of their patented golf clubs on The Home Shopping Network. They have decided if they can make at least a $1,000 return on the Fixed Costs of $10,000, they will launch the sale. Your marketing research predicted that total sales, at the $10.00 per unit price, would be at least 4,500 units. RAZ has provided you with their Direct Labor Costs per unit ($1.50) and their Material Costs per unit ($0.75).

    a. What is the Break Even Point to cover costs and the $1,000 profit?

    b. What will the total profit be if sales are 4,500 units as forecasted by marketing?

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    Solution Preview

    Variable cost per unit=V=direct labor cost per unit+direct material cost per unit=1.50+0.75=$2.25

    Fixed cost=F=$10,000

    Price per unit=P=$10

    Contribution margin ...

    Solution Summary

    The solution describes the steps to calculate break even point and total profit in the given case.