Excom Fiberoptics is bidding on contracts to sell micro test tubes for biotechnology research. in sets of 1,000 tubes. Fixed costs including depreciation associated with the project are $2,000,000, variable cost per set is $16. Excom expects to sell 250,000 sets. What is the minimum price it can charge and reach the accounting break-even point?
A) $8
B) $12
C) $24
D) $20

Question

Quizplus · Accepted Answer

The accounting break-even point is reached when total revenue equals total costs (both fixed and variable). Fixed costs are $2,000,000, variable cost per set is $16, and Excom expects to sell 250,000 sets. The total variable cost is $16 * 250,000 = $4,000,000. The total cost is the sum of fixed and variable costs, which is $2,000,000 + $4,000,000 = $6,000,000. To find the minimum price per set to break even, divide the total cost by the number of sets: $6,000,000 / 250,000 = $24.

Excom Fiberoptics Is Bidding on Contracts to Sell Micro Test