Yangtze Delta High Technology produces multimedia-enabled wireless phones. The factory incurs rent, depreciation, salary, and other fixed costs totaling RMB 10 million per year. Also, the company incurs annual interest of RMB 3 million on debt. Each phone sold by Yangtze Delta sells for RMB 200. The variable cost per phone is RMB 150. Yangtze Delta’s operating breakeven quantity of sales is closest to:
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The operating breakeven point is the quantity of product sold at which operating income is zero (revenue equals operating cost). F = Fixed operating cost = RMB 10,000,000 Operating breakeven quantity = F / (P ? V) = 10,000,000 / (200 ? 150) = 200,000.
P = Price per unit = RMB 200
V = Variable cost per unit = RMB 150
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