Question

Suppose a product has a fixed cost of $5000 and a variable cost of $7 per unit. If the items sell for $15 each, how many must be sold to break-even.

Answer 1

To break-even, 625 units must be sold, calculated by dividing the fixed cost of $5000 by the difference between the selling price per unit ($15) and the variable cost per unit ($7).

Step-by-step explanation:

To determine how many units must be sold to break-even, we need to calculate the point where total revenues equal total costs. The fixed cost is $5000, and the variable cost is $7 per unit. Items sell for $15 each.

The break-even point in units can be found using the equation:

Break-even point (units) = Fixed Costs / (Selling Price per unit - Variable Cost per unit)

Plugging in the numbers:

Break-even point (units) = $5000 / ($15 - $7)

Break-even point (units) = $5000 / $8

Break-even point (units) = 625 units

Therefore, 625 units must be sold to break-even.