Super Sharp manufactures and sells two products. The first product is a disposable shaving razor blade that lasts about 7 days. The second product is shaving cream. Customers of the first product use one bottle of shaving cream every 28 days. As a result, razor blades outsell shaving cream by a 4:1 ratio. Shaving Cream sells for $8 per bottle, and has a contribution margin ratio of 50%. The razor blades sell for $3 per blade, but only generate variables costs of $1.50. The company’s total fixed costs are $3,500,000.
Requirements:
What level of total sales is necessary to achieve break even?
If a competitor began selling razors that forced Super Sharp to reduce the price for its razors to $2.50 (to maintain market share and the 4:1 ratio of razors to shaving cream), how many Razor sets must be sold for the company to break even?