To be profitable, a firm must recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to...

To be profitable, a firm must recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit.

Consider the case of Blue Mouse Manufacturers:

Blue Mouse Manufacturers is considering a project that will have fixed costs of $10,000,000. The product will be sold for $37.50 per unit, and will incur a variable cost of $11.25 per unit.

Given Blue Mouse’s cost structure, it will have to sell units to break even on this project (QBEQBE).

Jun 07, 2022

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To be profitable, a firm must recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to...

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