You expect to sell 500 cell phones a month,which have a marginal cost of $50.If your fixed costs are $5,000 per month,what is the break-even price?

Question

Quizplus · Accepted Answer

To calculate the break-even price, we need to find the total cost and the total revenue at the expected sales level of 500 phones per month.

Total cost = Fixed cost + (Marginal cost x Units sold)
Total cost = $5,000 + ($50 x 500)
Total cost = $30,000

Total revenue = Price per unit x Units sold
Total revenue = Price per unit x 500

To break even, the total revenue must equal the total cost:
Price per unit x 500 = $30,000
Price per unit = $60

Therefore, the break-even price is $60, which means that you need to sell each phone for $60 in order to cover your costs and start making a profit. Choice C is the correct answer.

You Expect to Sell 500 Cell Phones a Month,which Have