Myers Implements is attempting to develop and market a new garden tractor. Fixed costs to develop and produce the new tractor are estimated to be $10,000,000 per year. The variable cost to make each tractor has been estimated at $1,800.00. The marketing research department has recommended a price of $4,000.00 per tractor.
(a) What is the breakeven level of output for the new tractor?
(b) If management expects to generate a target profit of $1,500,000 from the tractor each year, how many tractors must be sold?
Breakeven level of output:
Contribution margin per tractor: 4000-1800= ...