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Question

Lucid Images Ltd manufactures premium high definition televisions.

The firm's fixed costs are $4,000,000 per year. The variable cost of each TV is $2,000, and the TVs are sold for $3,000 each. The company sold 5,000 TVs during the previous year.
(In the following requirements, ignore income taxes)
Required:
Treat each of the requirements as independent situations:
a) Calculate the break-even point in units.
b) What will the new break-even point be if fixed costs increase by 10 per cent?
c) What was the company's net profit for the previous year?
d) The sales manager believes that a reduction in the sales price to $2,500 will result in orders for 1,200 more TVs each year. What will the break-even point be if the price is changed?

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