Sky, Inc. has just purchased a $600,000 machine to produce calculators. The mach

Question

Sky, Inc. has just purchased a $600,000 machine to produce calculators. The machine will be depreciated by the straight line method over its economic life of five years and will produce 20,000 calculators each year. There will be no inventory at the end of each year. The variable production cost per calculator is $15 and total fixed costs including depreciation costs are $1,100,000 per year. The corporate tax rate for the company is 40 percent. According to the survival break even analysis, what is the minimum selling price the firm should charge per calculator?

(a) $64

          (b) $55

          (c) $60

          (d) $70

          (e) None of the above

can u show working?

Explanation / Answer

At break even point , there is no profit & no Loss

Break even Price = [ FC / No. of units ] + VC per unit

= [ $ 1,100,000 / 20000 ] + $ 15

= $ 55 + $ 15

= $ 70

Pls comment, if any further assistance is required.

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