Dr. Peterside is considering buying a company if it will break even or earn net income on revenues of $80,000 per month. The company that Dr. Peterside is considering sells each unit it produces for $5. Use the following cost data to:
Volume (units) Cost
8,000 $70,000
68,000 190,000
Requirements:
a. Using the high-low method to compute the variable cost per unit and the fixed cost for the period.
b. Calculate the break-even point in sales dollar.
c. Should Dr. Peterside buy this company.