Question

The fixed cost of Boeing's new aircraft, the 797, is $6 billion. The average variable cost is $100,000,000. The sales price is $ 140,000,000. What is the projected breakeven volume

Answer 1

Answer:

The projected breaeven volume would be of 21 billion sales

Explanation:

The Break even point is the volume of sales at which the company pays their variable and fixed cost.

First, we calculate the contribution Margin

$Sales \: Revenue - Variable \: Cost = Contribution \: Margin$

140 - 100 = 40 million

Second, we calculate the contribution margin ratio

$\frac{Contribution \: Margin}{Sales \: Revenue} = Contribution \: Margin \: Ratio$

40/140 = 0,2857142

Last step, we solve for the BEP

$\frac{Fixed\:Cost}{Contribution \:Margin \:Ratio} = Break\: Even\: Point_{dollars}$

6,000/.2857142 = 21,000

The projected breaeven volume would be of 21 billion sales