Break-even NPV analysis
Denver Doughnuts is considering a new store location. For accounting purposes, fixed operating costs for a store are $23.500 a year, and variable costs are 40 percent of sales. Compute the breakeven sales level for a store location.
a. If average revenue per customer is $1.40, how many customers must be served each hour to break even in earnings? (The stores are open twenty four hours a day. 306 days a year.)
b. If the price (only) is raised 10 percent, what will be the new earnings break-teen point?