How many units of a product must be sold in order for the business to break even if total fixed costs are $500, the product is selling for $14, and the average variable cost is $8?

Question

Quizplus · Accepted Answer

To break even, the total revenue must equal the total cost.

Let x be the number of units sold.

Total Cost = Total Fixed Cost + Total Variable Cost 
Total Variable Cost = Average Variable Cost per unit x Number of Units Sold

Total Revenue = Selling Price per Unit x Number of Units Sold

Setting Total Cost equal to Total Revenue:

$500 + $8x = $14x 
$6x = $500 
x = 83.3

Rounding up, the business must sell at least 84 units to break even. Therefore, the best choice is B.

How Many Units of a Product Must Be Sold in Order