Question

14. A small company manufactures portable home computers. The plant has fixed costs (leases, insurance, and so on) of $48,000 per month and variable costs (labor, materials, and so on) of $1,400 per unit produced. The computers are sold for $1800 each. How many units must be manufactured and sold each month for the company to break even?

Answer 1

The break even point is given by:

`bp=\frac{\text{ fixed cost}}{\text{ selling price per unit-variable cost per unit}}`

Plugging the values given in the problem we have:

`bp=(48000)/(1800-1400)=120`

Therefore the need to produce and sell 120 units to break even