Question

Home Machines is thinking about competing in the home generator marketplace. For such a venture, Home...

Home Machines is thinking about competing in the home generator marketplace. For such a venture, Home Machines would face fixed costs of $2,542,560 for factory and equipment and $1,514,370 for utilities and overhead, and variable costs totaling $465 per generator manufactured. Home Machines expects to sell its generators for $790 each. Home Machines will not launch the venture unless it can be assured of turning a profit of at least $947,038. How many generators must Home Machines sell to just break even on this venture while meeting the profit target? (Rounding: tenth of a generator.) show step by step how you got the answer

Homework Answers

Answer #1

To earn minimum profit it should sell at least 15396.8 generators

Contribution margin

A

Sale Price per unit

$             790.00

B

Variable Cost per Unit

$             465.00

C=A x B

Unit Contribution

$             325.00

A

Fixed Cost

$ 40,56,930.00

B

Expected annual profits

$   9,47,038.00

C=A+B

Total contribution required

$ 50,03,968.00

D

Unit contribution (50-30)

$             325.00

E=C/D

No. of units to earn target profit

             15,396.8

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