Problem 2: Break-Even Analysis

Problem 2: Break-Even Analysis

XYZ Inc. sells photoframes for $20 each. The fixed costs are $60,000, and variable costs are $7 per photoframe.

1. What is the firm’s gain or loss at sales of 6,000 photoframes? At 15,000 photoframes?
2. How would the break-even point be affected if the selling price was raised to $25? How is this analysis significant?
3. If the selling price was raised to $25 but variable costs rose to $13 a unit, what would happen to the break-even point?

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