Question

A company is considering producing a product for a new market. The fixed costs required for manufacturing and delivering the product is $50,000. Labor and material costs are estimated to be approximately $25.00 per product. If the product is sold for $35.00 each, the firm's break-even volume would be:

Answer 1

Answer:

5,000 units

Explanation:

In this question we use the formula of break-even point in unit sales which is shown below:

= (Fixed expenses) ÷ (Contribution margin per unit)

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $35 - $25

= $10

And, the fixed cost is $50,000

Now put these values to the above formula  

So, the value would equal to

= ($50,000) ÷ ($10)

=  5,000 units