Question

If the proposed target price for a new product is $15 per unit, fixed costs are $50,000, and variable costs are $10 per unit. Which of the following is the correct amount of sales volume required to break even?

a. 3,000 units
b. 5,000 units
c. 10,000 units
d. 15,000 units

Answer 1

The correct amount of sales volume required to break even is 10,000 units.

Step-by-step explanation:

To calculate the sales volume required to break even, we need to consider the fixed costs and the variable costs.

Fixed costs are given as $50,000.

Variable costs are given as $10 per unit.

The target price for the new product is $15 per unit.

The formula to calculate the breakeven sales volume is:
Breakeven Sales Volume = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

Using the given information, we can calculate:
Breakeven Sales Volume = $50,000 / ($15 - $10) = $50,000 / $5 = 10,000 units.

Therefore, the correct amount of sales volume required to break even is c. 10,000 units.