Question

To produce a product, it costs Acme Corporation $50,000 plus $20 per product. If Acme sells each item at $25 each, how many must Acme sell to break even?

A) 2,500 products
B) 1,000 products
C) 4,000 products
D) 3,000 products

Answer 1

To find Acme Corporation's break-even point, we set total revenue equal to total costs. Upon solving the equation, we find that Acme must sell 10,000 products to break even, which does not match any of the provided answer choices.

Step-by-step explanation:

To determine the number of products Acme Corporation must sell to break even, we have to set the total revenue equal to the total costs. The fixed costs are $50,000, and the variable cost per product is $20. Acme sells each item for $25. The break-even point is found by the equation:

Break-even point (quantity) x $25 = $50,000 + ($20 x Break-even point (quantity))

Solving this gives us:

Break-even point (quantity) x $5 = $50,000

Break-even point (quantity) = $50,000 / $5

Break-even point (quantity) = 10,000

Therefore, Acme Corporation must sell 10,000 products to break even. However, this option is not listed in the answer choices provided, suggesting that there may be a mistake in the question or answer choices. Assuming the student is required to choose from these options, none of them is correct based on the calculation.