Artic 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 5000 TVs during the previous year. (In the following requirements, ignore income taxes).


1. Calculate the break-even point in units

2. What will the new break-even points be if fixed costs increase by 10%?

3. What was the company’s net profit for the previous year?

4. The sales manager believes that a reduction in the sales price to $2500 will result in orders for 1200 more TVs each year. What will the break even point be if the price is changed?

5. Should the price change discussed in requirement 4 be made? Explain.