Senbet Ventures is considering starting a new company to produce stereos. The sa

Question

Senbet Ventures is considering starting a new company to produce stereos. The sales price would be set at 1.5 times the variable cost per unit; the VC/unit is estimated to be $2.50; and fixed costs are estimated at $120,000. What sales volume would be required in order to break even, i.e., to have an EBIT of zero for the stereo business? Answer 86,640 91,200 96,000 100,800 105,840 Senbet Ventures is considering starting a new company to produce stereos. The sales price would be set at 1.5 times the variable cost per unit; the VC/unit is estimated to be $2.50; and fixed costs are estimated at $120,000. What sales volume would be required in order to break even, i.e., to have an EBIT of zero for the stereo business? Senbet Ventures is considering starting a new company to produce stereos. The sales price would be set at 1.5 times the variable cost per unit; the VC/unit is estimated to be $2.50; and fixed costs are estimated at $120,000. What sales volume would be required in order to break even, i.e., to have an EBIT of zero for the stereo business? 86,640 91,200 96,000 100,800 105,840 86,640 91,200 96,000 100,800 105,840

Explanation / Answer

break even point = fixed cost/(selling price - variable cost) = 120000/(1.5*2.5-2.5) =96,000

96,000

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