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Marketing: Pricing & Break Even

Selling birdcages.
Fixed cost (rent on a building, equipment, and so on) = $60,000
Expected variable costs = $12 per birdcage

1. if you plan on selling the birdcages to retail stores for $18, how many must you sell to break-even?

2. assume that you and your partner feel that you must set a goal of achieving a $20,000 profit with your business this year. How many units would you have to sell to make that amount of profit?

3. what if you feel that you will be able to sell no more than 5,000 birdcages? What price will you have to charge to break even? To make $30,000 in profit?

Solution Preview

1. Contribution Margin when sold at 18: 18-12= $6 per birdcage.

Fixed cost that needs to be recovered: 60,000

Break even units: 60,000/6= ...

Solution Summary

If you plan on selling the birdcages to retail stores for $18, how many must you sell to break-even?

$2.19