question archive Breakeven Problem: Campbell Soups Campbell Soups has set up a factory in Hong Kong at an estimated cost of $3
Breakeven Problem: Campbell Soups Campbell Soups has set up a factory in Hong Kong at an estimated cost of $3
Subject:MarketingPrice: Bought3
Breakeven Problem: Campbell Soups Campbell Soups has set up a factory in Hong Kong at an estimated cost of $3.1 Million. In the first few years of
operation, its product line will consist of duck soup and egg noodle soup to be sold in 16 oz. cans. The factory can
make 900,000 cans of soup a month (any combination of the two varieties).
Cost estimates for the product line is as follows:
Material cost/can: 5 cents (egg noodle), 20 cents (duck)
Labor cost per can: 18 cents (both types of soup)
Promotional costs: 10% of sales
Product line launch: $720,000
Administrative costs: $230,000 per year
Campbells will price the duck soup at $1.20 per can, and the egg noodle soup at $0.70 per can.
It expects to sell twice as many cans of duck soup as egg noodle soup.
(a) At break-even, how many cans of each type of soup would Campbell soups have sold?
(b) How soon can Campbell Soups break-even, assuming it can operate at full factory capacity?
