In determining the selling price, consider what the selling price of a competitor’s product would be. Now calculate the breakeven point using only production costs (material, labor, and overhead). Assume that you are going to start a business selling your product. You anticipate that you will incur the following costs in your first year of production: Selling expenses $ 50,000 plus 10% of sales revenue Administrative expenses $150,000 plus 15% of sales revenue Calculate the breakeven point in units and sales dollars using ALL costs – manufacturing and non-manufacturing costs. Determine how many units you must sell in order to earn a profit of $75,000. Assuming that you actually sell 50% more units past the breakeven point. What is your margin of safety? What is your operating leverage? How is CVP analysis used to help you plan for the future of your business?
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