Question

A firm is deciding between two different sewing machines. Technology A has fixed costs of $500 and marginal costs of $50 whereas Technology B has fixed costs of $250 and marginal costs of $100. ​If the price is $60 per unit, what is the break even amount of units for technology A?A. ​50 ​B. 100 ​C. 150​D. None-They would have to shut down

Answer 1

A. 50 units

Step-by-step explanation:

Break even point (units) = Fixed cost / (Selling price - Variable cost)

= $ 500 / ($ 60 - $ 50)

= $ 500/$10

= 50 units

The break-even point is derived by dividing the fixed costs of production by the price per unit - the variable costs of production. Break-even point is the level of production at which the costs of production equal the Income for the particular product