Grady Ltd. produces a single product and projects the following costs for a normal month in which 100 units are produced and sold: The selling price per unit is $300. What volume, in units, must Grady sell to break even?
A) 36
B) 58
C) 80
D) 90

Question

Grady Ltd. produces a single product and projects the following costs for a normal month in which 100 units are produced and sold:  The selling price per unit is $300. What volume, in units, must Grady sell to break even?
A) 36 
B) 58 
C) 80 
D) 90

Quizplus · Accepted Answer

To calculate the break even point, we need to find the total cost and total revenue first.

Total Fixed Cost (TFC) = $1,500
Variable Cost per unit (VC) = $150
Total Variable Cost (TVC) = VC x Units = $150 x 100 = $15,000
Total Cost (TC) = TFC + TVC = $1,500 + $15,000 = $16,500

Total revenue (TR) = Selling price per unit x Units = $300 x 100 = $30,000

Break even point (BEP) = TC / (SP - VC) = $16,500 / ($300 - $150) = 80 units

Therefore, Grady Ltd. must sell 80 units to break even.

Grady Ltd Produces a Single Product and Projects the Following Costs