The total fixed costs for a manufacturer of road maps are $25,000, and its unit variable cost is $3. The company sells 20,000 maps and just breaks even. What is the map's selling price?

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Quizplus · Accepted Answer

To break even, the total revenue must equal the total costs. The total fixed costs are $25,000, and the variable cost per unit is $3. If the company sells 20,000 maps to break even, we can set up the equation: Total Revenue = Total Fixed Costs + (Variable Cost per Unit * Quantity Sold). Let P be the selling price per map. So, the equation becomes: $20,000P = 25,000 + (3 * 20,000)$. Solving for P gives $20,000P = 25,000 + 60,000$, which simplifies to $20,000P = 85,000$. Dividing both sides by 20,000 gives $P = 4.25$.

The Total Fixed Costs for a Manufacturer of Road Maps