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.
-If MRI decided to match the selling price of the M-Phone, how many Blueberry phones would they have to sell in a month in order to break even?
A) 12,000
B) 16,000
C) 20,000
D) 24,000
E) 30,000

Question

Quizplus · Accepted Answer

To break even, the total revenue must equal the total costs. Let X be the number of Blueberry phones sold in a month.

Revenue = Selling Price * X = $200 * X
Variable costs = $120 * X
Total costs = Fixed costs + Variable costs = $800,000 + ($120 * X)

Equating revenue and total costs:
$200X = $800,000 + $120X
$80X = $800,000
X = 10,000

Therefore, MRI needs to sell 20,000 Blueberry phones in a month to break even if they match the selling price of the M-Phone ($40 less than the current selling price of Blueberry).

Refer to the Scenario Below to Answer the Following Questions