A company has fixed costs of $35,000 and has average variable costs of $7 per item. This company sells 10,000 units and just breaks even. What is the unit selling price for the product?
A) $7.35
B) $10.00
C) $10.50
D) $16.00

Question

Quizplus · Accepted Answer

To break even, the total revenue must equal the total costs. The total costs include both fixed costs and variable costs. The fixed costs are $35,000, and the variable costs are $7 per item. For 10,000 units, the total variable costs are $7 * 10,000 = $70,000. Therefore, the total costs are $35,000 (fixed) + $70,000 (variable) = $105,000. To break even on 10,000 units, the revenue must also be $105,000, which means the selling price per unit must be $105,000 / 10,000 units = $10.50.

A Company Has Fixed Costs of $35,000 and Has Average