Assume a fixed cost for a process of $120,000. The variable cost to produce each unit of product is $35, and the selling price for the finished product is $50. Which of the following is the number of units that has to be produced and sold to break even?
A) 5,000 units
B) 6,000 units
C) 8,000 units
D) 11,000 units
E) 12,000 units

Question

Quizplus · Accepted Answer

To break even, the total revenue generated from selling the units must be equal to the total cost incurred in producing those units.
Let x be the number of units produced and sold.
Total cost = fixed cost + variable cost
Total cost = $120,000 + ($35 x)
Total revenue = selling price x number of units sold
Total revenue = $50x
To break even, total cost = total revenue
$120,000 + ($35 x) = $50x
$120,000 = $15x
x = 8,000 units
Therefore, the answer is C, 8,000 units.

Assume a Fixed Cost for a Process of $120,000