Question

Global Corp. sells its output at the market price of $7 per unit. Each plant has the costs shown below: What is the breakeven quantity

Answer 1

Based on the cost to Global Corp. to make the units and the selling price, the breakeven quantity is 4 units.

How can the breakeven quantity be found?

The breakeven quantity would be the point where the cost of the units is equal to the revenue.

At 3 units, the revenue is:

= 3 x 7

= $21

At 4 units, the revenue is:

= 7 x 4

= $28

At 5 units, the revenue is:

= 5 x 7

= $35

At the fifth unit, the revenue is less than the cost so the breakeven point is less than 5 units.

At the third unit the revenue is more than the cost so the breakeven point is more than 3 units.

After the 4th unit point, the cost becomes more than the revenue which means that 4 units is the approximate breakeven point.

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