Management insists that a purchase be made only if the break-even point for the purchase is at least 500 units. If the fixed cost is $600 and variable cost per unit is $3, what is the selling price that should be set to exactly achieve this break-even point?
A) $4.20
B) $5.00
C) $6.00
D) Cannot be determined from the information given

Question

Quizplus · Accepted Answer

Break-even point = Fixed cost / (Selling price - Variable cost per unit)500 = 600 / (Selling price - 3)Selling price - 3 = 600 / 500Selling price - 3 = 1.2Selling price = 1.2 + 3Selling price = $4.20

Management Insists That a Purchase Be Made Only If the Break-Even