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
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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