Question

If a firm that made only one type of product had a selling price per unit of $20 and variable costs of $15 per unit while experiencing fixed costs of $20,000, the number of units would they have to sell to achieve an income of $5000 would equal or exceed 10,000 units.

1. True
2. False

Answer 1

The number of units the firm needs to sell to achieve an income of $5000 is 1000 units.

Step-by-step explanation:

The student's statement is false. To determine the number of units the firm needs to sell to achieve an income of $5000, we need to calculate the contribution margin per unit.

The contribution margin is the selling price per unit minus the variable cost per unit. In this case, the contribution margin is $20 (selling price) - $15 (variable cost) = $5 per unit. To achieve an income of $5000, the firm would need to sell 5000 / $5 = 1000 units.