Question

The variable cost for a product is $1.00 and the total fixed costs are $88,000. The company sells the products for $3.00 each. How many products will the company have to sell to break even?

Answer 1

The breakevenpoint is the point at which costs and sales are equal to each other and therefore, the profit is zero.

The breakeven point in terms of number of units sold can be determined as follows;

`\begin{gathered} Breakeven\text{ units=}\frac{Fixed\text{ costs}}{\text{ Selling price per unit-}Variable\text{ cost per unit}} \\ \text{Breakeven units=}(88000)/(3-1) \\ \text{Breakeven units=}(88000)/(2) \\ \text{Breakeven units=44000} \end{gathered}`

In order to breakeven, the company will have to sell 44,000 units