Question

fabricators, inc. wants to increase capacity by adding a new machine. the fixed costs for machine a are $90,000, and its variable cost is $15 per unit. the revenue is $21 per unit. what is the break-even point for machine a?

Answer 1

The break-even point for machine A given fixed costs and the variable costs is 5000.

What is break-even point?

In economics, business, and specifically cost accounting, the break-even point (BEP) is the point at which total cost and total income are equal, i.e. "even." Even if opportunity costs were paid and capital received the expected return after adjusting for risk, there is no net loss or gain, and one has "broken even." In other words, no profit or loss is made once all necessary expenses have been covered. In either unit or revenue terms, the break-even point or level denotes the amount of sales necessary to cover all costs, including both fixed and variable costs to the business. This indicates that in order for a corporation to recoup their initial investment in a good or component, the selling price of the good or component must be higher than what was spent for it.

Breakeven quantity = fixed cost/ price – variable cost per unit

$50,000 / $10 = 5000

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