your uncle is considering investing in a new company that will produce high quality stereo speakers. the sales price would be set at 1.40 times the variable cost per unit; the variable cost per unit is estimated to be $50.00; and fixed costs are estimated at $1,000,000. what sales volume would be required to break even, i.e., to have ebit

The company would need to sell 50,000 units of the stereo speakers in order to break even and achieve EBIT (earnings before interest and taxes) of zero.

What is EBIT?

EBIT, or earnings before interest and taxes, is a financial metric that measures a company's profitability before taking into account the cost of borrowing (interest) and taxes. It is calculated by subtracting a company's operating expenses from its revenue.

To calculate the break-even point, we need to determine the total cost per unit, which is the sum of the variable cost per unit and the fixed costs divided by the number of units.

First, we can calculate the sales price per unit by multiplying the variable cost per unit by the sales price to variable cost ratio: $50.00 * 1.40 = $70.00.

Then, we can calculate the total cost per unit by adding the variable cost per unit to the fixed costs and dividing by the number of units: ($50.00 + $1,000,000) / X = $70.00, where X is the number of units.

Solving for X, we find that the number of units required to break even is X = $1,000,000 / ($70.00 - $50.00) = $1,000,000 / $20.00 = 50,000 units.

Hence, the company would need to sell 50,000 units in order to break even and achieve EBIT.

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