Fred's break-even point for his "Fred's Fantastic" (FF) sport drink is 19,000 bottles per year. Fred thinks the market for his FF drink is closer to 15,000 bottles per year. Therefore, Fred would like to reduce his break-even point. Fred should

Question

Quizplus · Accepted Answer

Breakeven is calculated as fixed costs divided by contribution margin per unit (sales less variable costs). Fred should reduce his variable costs, thereby increasing his contribution margin for each bottle of FF sold. Increasing fixed costs or decreasing his selling price will generate a higher break-even point, which is not the objective.

Fred's Break-Even Point for His "Fred's Fantastic" (FF) Sport Drink