The ABC Corporation is considering introducing a new product,which will require buying new equipment for a monthly payment of $5,000.Each unit produced can be sold for $20.00.ABC incurs a variable cost of $10.00 per unit.How many units must ABC sell each month to break even?
A)500 units
B)5000 units
C)250 units
D)2500 units
E)25 units

Question

Quizplus · Accepted Answer

To break even, the total revenue must equal the total costs. The fixed cost is the monthly payment for the new equipment, $5,000. The variable cost per unit is $10.00, and each unit is sold for $20.00, resulting in a profit of $10.00 per unit. To cover the fixed cost of $5,000, ABC must sell $5,000 / $10.00 = 500 units.

The ABC Corporation Is Considering Introducing a New Product,which Will