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Cox Electric makes electronic components and has estimated the following for a new design of one of its products:

Fixed Cost =$7,000
Material cost per unit =$0.15
Labor cost per unit =$0.10
Revenue per unit =$0.65
Production Volume =12,000 in increments of 5,000.

In which interval of production volume does breakeven occur?

User Rada
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1 Answer

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Final answer:

The breakeven point for Cox Electric is at 17,500 units, which falls into the interval after 12,000 units when using increments of 5,000, thus the breakeven occurs in the 12,000 to 17,000-unit interval.

Step-by-step explanation:

The subject of the question concerns the calculation of the breakeven point for a company within the field of business and economics.

To find the breakeven point, we need to determine the level of production at which total costs equal total revenues. Here's how to calculate the breakeven point for Cox Electric:

  • Fixed Costs: $7,000 (does not change with the level of production)
  • Variable Costs per unit: $0.25 ($0.15 for materials and $0.10 for labor)
  • Revenue per unit: $0.65

The breakeven point occurs when Total Costs = Total Revenue.

Total Costs = Fixed Costs + (Variable Cost per unit × Production Volume)

Total Revenue = Revenue per unit × Production Volume

Setting Total Costs equal to Total Revenue and solving for Production Volume (V), we get:

7,000 + (0.25 × V) = 0.65 × V

0.65V - 0.25V = 7,000

0.4V = 7,000

V = 7,000 / 0.4

V = 17,500 units

Therefore, the breakeven point is at 17,500 units, which means it occurs between the production volume intervals of 12,000 and 17,000 units. As the increments are in 5,000, the breakeven interval would be the one following 12,000, which is between 12,000 and 17,000 units.

User CreatoR
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