Question: (Break-even point and operating leverage) King Inc. is a health wine company in China. The average selling price of its finished product is 38 Chinese Yuan Renminbi (RMB) per bottle (500 ml/bottle). The variable cost of the same bottle of wine is RMB 15. King Inc. incurs fixed costs of RMB 175 million per year.
a. What is the break-even point in bottles of health wine for the company?
b. What is the RMB sales volume the firm must achieve to reach the break-even point?
c. What would the firm's profit or loss at the following annual units of production sold: 5 million bottles? 8 million bottles? 10 million bottles?