Question

If the fixed cost is 9000 per year. Variable costs are estimated to be Tk. 60.75 / item. The firm wants to break even if 80 items are sold per year. What should be the unit price of the item?

Answer 1

9514 1404 393

Answer:

Tk 173.25

Explanation:

The firm will break even if its cost is equal to its revenue. That is, the price of each item sold must equal the cost of producing it. To cover the fixed cost, a share of it must be added to each of the items sold. Then the break-even price for 80 items is ...

price = variable cost + share of fixed cost

price = Tk 60.75 +9000/80 = Tk 60.75 +112.50 = Tk 173.25