Question

A company is evaluating which of two alternatives should be used to produce a product that will sell for $35.00 per unit. The following cost information describes the two alternatives Process A Process BFixed Cost $500,000 $750,000Variable Cost per Unit $25.00 $23.00The break-even volume for Process A isa. 50,000 unitsb. 62,500 unitsc. 30,000 unitsd. 20,000 units

Answer 1

Answer:

a. 50,000 units

Explanation:

Breakeven point is the units  required to be sold for the total cost to be equivalent to the sales. As such, break even is the point where profit/loss is nil.

Given information about product A;

Fixed cost = $500,000

variable cost per unit = $25

Selling price per unit = $35

Breakeven in units = fixed cost/(selling price per unit - variable cost per unit)

= 500,000/(35 - 25)

= 50,000 units