Final answer:
To compute the break-even point in units, divide the fixed costs by the difference between the selling price per unit and the variable cost per unit. In this case, the break-even point is approximately 5,906 units. To illustrate the break-even point, a table is filled in with the corresponding quantities, total revenue, total cost, and profit. At the break-even point, the total revenue equals the total cost, resulting in a profit of $2.
Step-by-step explanation:
Break-even analysis is a tool used in business to determine the point at which a company covers its costs and starts generating profit. To compute the break-even point in units, we need to divide the fixed costs by the difference between the selling price per unit and the variable cost per unit. In this case, the fixed costs are $94,500, the selling price per unit is $37, and the variable cost per unit is $21. Using the formula:
Break-even point in units = Fixed costs / (Selling price per unit - Variable cost per unit)
Break-even point = $94,500 / ($37 - $21) = $94,500 / $16 = 5,906.25 units
Therefore, the break-even point in units is approximately 5,906 units.
To illustrate that the break-even point has been achieved, we can fill in the following table:
QuantityTotal RevenueTotal CostProfit0$0$94,500-$94,5001$37$115-$782$74$136-$623$111$157-$464$148$178-$305$185$199-$14
6 (Break-even point)
$222
$220
$2
7$259$241$18
At the break-even point of 6 units, the total revenue equals the total cost, resulting in a profit of $2.