Refer to the scenario below to answer the following questions.
Breakeven Analysis at MRI (Scenario)
Mike has just been hired as a sales manager at Mobile Research Inc. (MRI), makers of the popular Blueberry wireless phone. At his first management briefing, Mike is informed that the company is losing money, despite the immense popularity of the Blueberry phone. He learns that the company is facing intense competition from its main rival, Mandarin Communications, makers of the M-Phone. The M-Phone has the same popular features as the Blueberry and sells for $40 less. When Mike asked about the cost structure for the Blueberry he was informed that the selling price is $200, variable costs are $120, and total fixed costs are $800,000 per month.
-Mike calculated the current breakeven point for the Blueberry to be __________ units per month.
A) 8,000
B) 10,000
C) 12,000
D) 15,000
E) 20,000

Question

Quizplus · Accepted Answer

To calculate the breakeven point, we use the equation:

Breakeven Point (in units) = Total Fixed Costs / (Price per unit – Variable cost per unit)

Plugging in the values given in the scenario:

Breakeven Point = 800,000 / (200 – 120)

Breakeven Point = 10,000 units per month

Therefore, the correct answer is B) 10,000. This is the minimum number of units that must be sold for MRI to cover all of its costs and break even. Any sales beyond this point will result in a profit for the company.

Refer to the Scenario Below to Answer the Following Questions