The fixed cost of Widget Corp., a keyboard manufacturing company, is $600,000 per year. The cost of equipment and labor to make one keyboard is $10. If the customers would pay $25 to buy one keyboard, Widget Corp. needs to sell _____ keyboards to make profits.
A) at least 50,000
B) at least 45,000
C) more than 40,000
D) less than 35,000

Question

Quizplus · Accepted Answer

To make a profit, revenue must exceed total costs. The break-even point is where total costs equal total revenue. Fixed costs are $600,000, and variable costs are $10 per keyboard. Selling price is $25 per keyboard. Break-even quantity = Fixed Costs / (Selling Price - Variable Cost) = $600,000 / ($25 - $10) = 40,000 keyboards. To make a profit, Widget Corp. must sell more than 40,000 keyboards.

The Fixed Cost of Widget Corp