# The Oliver Company plans to market a new product. Based on its market studies, Oliver estimates that it can sell up to 4,500 units in 2005. The selling price will be \$2 per unit. Variable costs are estimated to be 20% of total revenue. Fixed costs are estimated to be \$6,400 for 2005. How many units should the company sell to break even?

How do I calculate the units to break even? What type of formula do I use?

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1. revenue = units * price/unit
r = 2x for x units

var cost = .2r
fix cost = 6400

total cost c = 6400 + .2(2x)
total revenue = 2x

breakeven when cost = revenue
2x = 6400 + .4x
1.6x = 6400
x = 4000

so, at 4000 units,

revenue = 8000
cost = 6400 + .2(8000) = 8000

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2. XYZ Company plans to market a new product.Based on its market studies,the company estimates that it can sell 5500 units in 2004.The selling price will be birr 2 per unit.Variable costs are estimated to be 40% of the selling price.Fixed costs are estimated to be \$ 600 A)Develop the revenue,cost and profit functions interms of sales and quantity B) What is the break even point in units and in birr? C) If the company faces a loss of 4000 birr what will be the sales? D)Support your answer using the break-even chart (Show all the necessary lines and points E) If the company is sure of selling 5500 units every year,Determine the least price that should be charged in order to guarantee no loss.

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3. Yes

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4. Assignment

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