Answer:
Number of units to be produced and sold= 7,000 units
Explanation:
Giving the following information:
Variable costs of production $50 per unit
Variable costs of sales and administration $25 per unit
Fixed costs of production $100,000 per year
Fixed costs of sales and administration $50,000 per year
Selling price= $100 per unit
Desired profit= $25,000
To calculate the number of units to be produced and sold, we need to use the break-even point formula:
Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit
Fixed costs= (100,000 + 50,000)= 150,000
Unitary variable cost= (50 + 25)= $75
Break-even point in units= (150,000 + 25,000) / (100 - 75)
Break-even point in units= 7,000 units
