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MARKETING PRINCIPLES
MKTG 305
Break-even Assignment
Often a firm will calculate the break-even point for a price. That is, if we set the price at $X, then how many units will we need to sell to cover costs (that is, our break-even point). Work through the following data and questions to gain a better understanding of this approach.
QUESTIONS
1. Start by completing the above table under the assumption that the product will be sold for $30. (It will be easiest to use Excel to complete the table.) How many units need to be sold to break-even at a product price of $30?
2.
Now recalculate the table under the assumption that the product will be sold for $15. How many units need to be sold to break-even at a product price of $15?
3. What do you think you would set first: the sales target or the price? Why?
No. of Units
Variable Cost/Unit
Total Production
Cost
Average Unit Cost
Unit Price
Gross Profit
500
$10,000
$10
1,000
$10,000
$10
1,500
$10,000
$10
2,000
$10,000
$10
2,500
$10,000
$10
Sheet1
No. of Units | Allocated Fixed | Cost | Variable Cost/Unit | Total Production | Average Unit Cost | Unit Price | Total Sales Revenue | Gross Profit | |||
500 | $ 10 | ||||||||||
1,000 | $ 10,000 | ||||||||||
1,500 | |||||||||||
2,000 | |||||||||||
2,500 |