University Of Texas At Austin Operations And Supply Chain Management Assignment Help - Break even analysis

Question - Gigi LeBlanc founded a company to produce a special bicycle suspension system several years ago
after her son, who worked for a bicycle delivery service, was hurt in a riding accident. The market's
response has been overwhelmingly favorable to the company's new suspension system. Riders report
feeling that they experience fewer "unpredictable" bumps than with traditional suspension systems.
Gigi made an initial investment of $100,000 and has set a target of earning a 30 percent before-tax
return on her investment. Gigi expects her company to sell approximately 10,000 suspension systems
in the coming year. Based on this level of activity, variable manufacturing costs will be $5 for each
suspension system. Fixed selling and administrat ...Read More ive expenses will be $2 per system, and other fixed
costs will be $1 per system.
Required:
A. Calculate the sales price that Gigi LeBlanc's company must charge for a suspension system if she
is to earn a 30 percent before-tax return on her investment.
$ per unit
B. Calculate the company's break-even point.
units
C. Assuming that Gigi's company maintains the current activity level, how can she increase her pre-
tax return on investment to 35 percent? ...Read Less

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