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Break-even point and sales price of suspension system

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Initial investment 100,000
Target of earning 30%
Expected sales 10,000
Manufacturing cost $5
Fixed selling & adm $2
Other fixed cost $1

A) Calculate the sales price that the company must charge for a suspension system if she is to earn a 30 percent return on her investment.

B) Calculate the company's break-even point.

C) Assuming the company maintains the current activity level, how can she increase her return on investment to 35 percent?

Please show work.

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Solution Summary

This post shows how to calculate the sales price that the company must charge for a suspension system and the company's break-even point. It discusses how to increase the return on investment.

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a) Let selling price = x
Sales = 10000 units
Variable cost = manufacturing cost = $5
Fixed cost = Fixed selling & admin + Other fixed cost = 2+1 = $3
Total fixed cost = 3*10000=30000
xed cost
Required Profit = Profit percentage * initial investment = ...

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