Question

A car company invests $200,000 in developing auto-car software. Each software costs $150 to produce and

sells for $400. How many software must the company sell break-even? Determine the break-even point.
Refer to the Cost and Revenue equation.

Answer 1

Break even unit = 800

Break even point = $320,000

Explanation:

Given:

Amount invested (Fixed cost) = $200,000

Each software cost (variable cost) = $150

Selling price = $400

Find:

Break even unit

Computation:

Assume;

Break even unit = a

Total Cost = Amount invested (Fixed cost) + [Each software cost][Break even unit]

Total cost = 200,000 + 150a

Total revenue = Selling price[Break even unit]

Total revenue = 400a

So,

400a = 200,000 + 150a

250a = 200,000

Break even unit = 800

Break even point = 400a

Break even point = 400(800)

Break even point = $320,000