Question

TransTech sells its product for $100. Marginal cost is a constant $90 per unit and fixed costs are $15,500.

1)What is the breakeven quantity?
2)What is the breakeven revenue?

Answer 1

The breakeven quantity for TransTech's product is 1,550 units, and the breakeven revenue is $155,000, calculated based on the provided cost structure and selling price.

Step-by-step explanation:

The student's question is about finding the breakeven quantity and breakeven revenue for a product sold by TransTech. To calculate the breakeven quantity, we use the formula:

Breakeven Quantity = Fixed Costs / (Selling Price per Unit – Marginal Cost per Unit)

In this case, the breakeven quantity would be $15,500 / ($100 - $90) = 1,550 units. To find the breakeven revenue, we multiply the breakeven quantity by the selling price per unit:

Breakeven Revenue = Breakeven Quantity × Selling Price per Unit

Breakeven Revenue = 1,550 units × $100/unit = $155,000

Therefore, TransTech needs to sell 1,550 units at $100 each to break even, resulting in a breakeven revenue of $155,000.