# The variable cost in NewShoes is the unit cost of the product. Fixed costs are the marketing expenses for a region along with the allocated product…

The variable cost in NewShoes is the unit cost of the product. Fixed costs are the marketing expenses for a region along with the allocated product development expense. Applying the formula with a variable cost of \$40, and fixed expenses of \$3,500,000, the break-even price for 100,000 units would be: break-even price = \$40 + \$3,500,000 / 100,000 = \$40 + \$35 = \$75

1. Using the fixed expenses and projected sales from the example, what would the break-even price be if unit cost is \$35?

2. If the break-even price is \$75, and your target return on sales is 20%, what is the selling price?

− Use the following data for questions 3 & 4 − units sold \$100.000 consumer promotions \$1,800,000 unit cost \$40 personal selling 5 salespeople @ \$80,000 each target return on sales 10% dealer promotions \$1,200,000 advertising \$1,500,000 product development \$700,000

3. Calculate the break-even price.

4. What would the selling price have to be to get the target return?

5. What other factors besides break-even should you consider before setting price?