Question

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

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