Question

Eaton Tool Company has fixed costs of $255,000, sells its units for $66, and has variable costs of $36 per unit. What is the break-even point in units?

a) 3,000 units
b) 5,000 units
c) 7,500 units
d) 10,000 units

Answer 1

The break-even point in units for Eaton Tool Company is 8,500 units.

Step-by-step explanation:

To find the break-even point in units, we need to determine the number of units where the company's total revenue equals its total costs.

The total revenue equation is given by:

Total Revenue = Price x Quantity

The total cost equation is given by:

Total Cost = Fixed Costs + Variable Costs x Quantity

Setting these equations equal to each other, we have:

Price x Quantity = Fixed Costs + Variable Costs x Quantity

Simplifying the equation, we get:

Price x Quantity - Variable Costs x Quantity = Fixed Costs

Substituting the given values, we have:

$66 x Quantity - $36 x Quantity = $255,000

Solving for Quantity:

30 x Quantity = $255,000

Quantity = $255,000 / $30 = 8,500 units

Therefore, the break-even point in units is 8,500 units.