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Clara

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Could you please clarify Q6 ?

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Book a coaching with Clara

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Hello Ana!

For this problem in particular, but also in general when it comes to production cost, think of break even always from the equation:

Fixed cost / (Price per unit - Cost per unit)

  • Fixed costs: overall fixed costs for running the production (e.g., administration, plan, electricity, etc.) They need to be allocated to each product produced, in a fraction
  • Price per unit: price at which each unit is sold
  • Cost per unit: on top of the fixed ones, there are other costs, variable costs, associated to the price of producing each unit (e.g., raw material)

Hence, here we would need to divide $1B of fixed costs by $64, to obatin number of units of 15.6 million customers.

Hope it helps!

Cheers,

Clara

Hello Ana!

For this problem in particular, but also in general when it comes to production cost, think of break even always from the equation:

Fixed cost / (Price per unit - Cost per unit)

  • Fixed costs: overall fixed costs for running the production (e.g., administration, plan, electricity, etc.) They need to be allocated to each product produced, in a fraction
  • Price per unit: price at which each unit is sold
  • Cost per unit: on top of the fixed ones, there are other costs, variable costs, associated to the price of producing each unit (e.g., raw material)

Hence, here we would need to divide $1B of fixed costs by $64, to obatin number of units of 15.6 million customers.

Hope it helps!

Cheers,

Clara

(edited)

Book a coaching with Ian

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Hi Ana,

Breakeven point can be calculated by:

  • Fixed costs / (price per unit - cost per unit)

the equation is basically Fixed Costs = Profit * # of Units

In this case, price per unit minus cost per unit is actually already provided to us (profit of $64 per customer). So, all we need to do is divide fixed costs of $1B by $64, to get # of units of 15.62 million customers!

Hi Ana,

Breakeven point can be calculated by:

  • Fixed costs / (price per unit - cost per unit)

the equation is basically Fixed Costs = Profit * # of Units

In this case, price per unit minus cost per unit is actually already provided to us (profit of $64 per customer). So, all we need to do is divide fixed costs of $1B by $64, to get # of units of 15.62 million customers!