Question

What is the break-even quantity for the following situation? fc = $1,200 per week vc = $2 per unit rev = $6 per unit

a)600
b)100
c)1, 200
d)200
e)300

Answer 1

The break-even quantity for a business with fixed costs of $1,200 per week, a variable cost of $2 per unit, and revenue of $6 per unit is 300 units. This is found using the break-even formula, dividing the fixed costs by the difference between revenue per unit and variable cost per unit.

Step-by-step explanation:

The break-even quantity is the number of units a company must sell to cover all its costs. In order to calculate the break-even quantity, we use the formula:
Break-Even Quantity (BEQ) = Fixed Costs / (Revenue per unit - Variable Cost per unit)

For the given situation:
Fixed Costs (FC) = $1,200 per week
Variable Cost (VC) per unit = $2
Revenue (Rev) per unit = $6

Now, let's calculate the break-even quantity:
BEQ = $1,200 / ($6 - $2) = $1,200 / $4 = 300 units
Therefore, the break-even quantity is 300 units.