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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. (2 marks)
b) What will the new break-even point be if fixed costs increase by 10 per cent? (2 marks)
c) What was the company's net profit for the previous year? (4 marks)
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? (2 marks)

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