Break even analysis for the Brake Supply Company
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Scenario: The Brake Supply Company has a small plant that produces speedometers exclusively. Its annual
fixed costs are $30,000, and its variable costs are $10/unit. It can sell a
speedometer for $25.
1. How many speedometers must the company sell to break
even?
2. What is the break-even revenue?
3. The company sold 3,000 units last year. What was its profit?
4. Next year's fixed costs are expected to rise to $37,500.
What will be the break-even quantity?
5. If the company will sell the number of units obtained in the previous question and wants to maintain the same profit as last year, what will its new price need to be? Round your answer to the nearest whole number.
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Solution Summary
Step by step solution with formulas and workings analyzing the break-even scenario.
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Solution:
1. Break-even point = Fixed costs /[Selling price - Variable cost]
= 30,000 / [25 - 10]
= 2,000 units
2. ...
Education
- MPhil, Madurai Kamaraj University
- MCom, Annamalai University
- IATA, International Air Transport Association
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