Question

A small software development company invests $16,000 to produce a software package that will sell for $50.65. Each unit costs $8.20 to produce. How many units must the company sell to break even? How many units must the company sell to make a profit of $95,000?

Answer 1

376 units and 1,857 units

Explanation:

The computation is shown below:

The number of units that company sells to break even is

Let us assume the number of units be x

$16,000 + $8.20x = $50.75x

$16,000 = $50.75x - $8.20x

$16,000 = $42.55

x = $16,000 ÷ $42.55

= 376 units

Now in order to make the profit the number of units sold is

$50.65x - ($16,000 + $8.20x) = $95,000

$50.65x - $16,000 - $8.20x = $95,000

$42.55x = $95,000 - $16,000

$42.55x = $79,000

x = $79,000 ÷ $42.55

= 1,857 units