Question

Pulaski Plumbing Supply is planning to bring a new type of valve to market and is conducting a break-even analysis. For this analysis, they are assuming a selling price of $2.50 per valve. The total fixed cost associated with producing the valve is $10,000. The variable cost to produce each valve is $2.10.
In this analysis, what is the break-even point (BEP) for the valve?

a) 2,174 units
b) 25,000 units
c) 50,000 units
d) 4,000 units
e) 4,762 units

Answer 1

Answer:

b) 25,000 units

Explanation:

The price is 2.50, the variable cost is 2.10, and the fixed cost is 10,000 and in order to find the break even point we will assume x as the break even quantity and try to make a mathematical equation. So the fixed cost plus the variable cost multiplied by the number of units (x) should be equal to the price multiplied the number of units (X)

2.50x=10,000+2.10x

0.40x=10,000

x=10,000/0.4

x=25,000