Question

Ecstasy Pharmaceuticals faces fixed costs of $1 million with manufacturing its new drug. The company sells the drug in bottles of 50 pills for $10. The company estimates that it must sell 200,000 bottles to break even. What is the total cost to produce a bottle of 50 pills

Answer 1

Answer:

The cost of producing one bottle is $10 .

Explanation:

The fixed costs of making the drug = $1 million

The selling price of the 50 pills bottles = $10

Total number of bottles sold at breakeven =200000

Total revenue from the sale of bottle = $10 × 200000

Total revenue from the sale of bottle = $2000000

Since at breakeven point the total revenue is equal to total cost. So, total cost of producing the 200000 bottles is $2000000.

Thus, the cost of producing one bottle = $2000000 / 200000 = $10