Question: (TCO C) ServerSolutions’ management has asked yo…
(TCO C) ServerSolutions’ management has asked you to help the firm identify its EBDAT breakeven level. The company has only one product, the Pinnacle Server, a blazing fast network server that accelerates corporate database network access. The firm’s servers sell for $4,500 each. Each server costs $3,000 in materials and manufacturing costs (all production is outsourced to an external manufacturer). The firm’s office lease in Puget Sound is $210,000 annually, its magazine advertising expense is $390,000 per year, and compensation costs are $300,000 annually.
Complete the following, and show all your calculations for each.
Part 1: Calculate the firm’s a) EBDAT revenue, and b) contribution profit margin at EBDAT breakeven.
Part 2: If the firm sells 1,800 servers, what will be its c) gross profit percentage, d) operating income, and e) operating income percentage? (Show all calculations)