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break-even quantity

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FLEXO markets shoes under its brand name. Recently it developed a new product.The investment in the product was $1.5 million. The company expected to depreciate the investments over the TEN-year-period. Annual depreciation is used as an element of fixed costs. The project overhead cost per year was $350,000. The labor cost was $30 per pair and material cost was $20 per pair. The average price of similar shoes in the market is $200. If the wholesale/retail trade margins together 50%, what should be FLEXO's price at which it will sell its shoes to the wholesale/retail trade?

What would be the break-even quantity at this price? At this price how many shoes will FLEXO have to sell to make profit before tax of $1,000,000 ? If the variable cost were to change (INCREASE) by 10%, calculate the break-even quantity and the quantity required to achieve the $1,000,000 profit. If the total size of the market is 100,000 units, what would be the market share required to achieve break-even quantity and the profit target?

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Solution Preview

FLEXO markets shoes under its brand name. Recently it developed a new product. The investment in the product was $1.5 million. The company expected to depreciate the investments over the TEN-year-period. Annual depreciation is used as an element of fixed costs. The project overhead cost per year was $350,000. The labor cost was $30 per pair and material cost was $20 per pair. The average price of similar shoes in the market is $200. If the wholesale/retail trade margins together 50%, what should be FLEXO's price at which it will sell its shoes to the wholesale/retail trade?
Solution
Cost of labor and material comes under variable cost.
Total cost = Fixed costs + Variable cost (x), where "x" is the number of shoes.
Given: Annual depreciation is used as an ...

Solution Summary

The break-even quantity is estimated.

$2.19
See Also This Related BrainMass Solution

Financial break even quantity

Consider a project with the following data: accounting break-even quantity = 30,000 units; cash break-even quantity = 16,500 units;life = 6 years; fixed costs = $210,000; variable costs = $29 per unit; required return = 14 percent. Ignoring the effect of taxes, the financial break-even quantity is units. (Round your answer to 2 decimal places, e.g. 32.16.)

Q=Fix costs+Operating cashflow/price (unit)-variable costs unit

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