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Zinc Energy Resources Co., a new division of a major battery manufacturing company, recently patented a new battery that uses zinc-air technology. The unit costs for the zinc batter are $8 for housing, materials are $6, direct labor is $6 per unit. Retooling the existing factory facilities to manufacture the batteries amount to an additional $1 million in equipment cost. Annual fixed costs include sales marketing and advertising expenses of $1 million; general and administrative expenses of $1 million and other fixed cost totaling $2 million.

If the price for the new batter was set at $35, what would the breakeven point be?

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facundobuzzetti

Answer:

Break-even point= 333,333 units

Explanation:

Giving the following information:

The unit costs for the zinc batter are $8 for housing, materials are $6, direct labor is $6 per unit.

Retooling the existing factory facilities to manufacture the batteries amount to an additional $1 million in equipment cost. Annual fixed costs include sales marketing and advertising expenses of $1 million; general and administrative expenses of $1 million and other fixed cost totaling $2 million.

Break-even point= fixed costs/ contribution margin

Break-even point= (1m + 1m + 1m + 2m)/(35 - 20)= 333,333 units

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