Exercise Content
- An ophthalmology practice is deciding whether to offer prescription eyeglasses for sale in-house. The new service would require training and hiring of additional personnel, inventory for glasses and frames, and some minor space alterations. The utilized space in the office would be a charge allocated to the program. The costs for this new service are:
- Variable costs: $80 per completed pair of eyeglasses (electricity, labor, supplies)
Total fixed cost: $36,000
How much volume does the group need to break even if they charge $100 per pair of eyeglasses? If they charge $200?2 Assume that in the problem above, the total market for eyeglasses in this community is 2,400 pairs. What are the market share percentages they need to break even at a $100 price? A $200 price?
The total market for eyeglasses is 2,400. Now, the consideration of the break-even point shows the amount of market share required to break even.The break-even calculations are based on the formula:
Break-even point = Fixed costs / Price – Variable costShow your calculations.