Grady, Inc. produces a single product and projects the following costs for a normal month in which 100 units are produced and sold: Manufacturing Non-manufacturing
Fixed costs $8,000 $5,000
Total variable costs 7,700 6,050
The selling price per unit is $300. What volume, in units, must Grady sell to break even?

Question

Quizplus · Accepted Answer

To break even, the total revenue must equal total costs.
Total revenue = selling price x quantity sold = $300 x Q
Total costs = fixed costs + variable costs = $13,750 ([(manufacturing fixed costs + manufacturing variable costs) + non-manufacturing fixed costs + non-manufacturing variable costs])
So, $300Q = $13,750
Q = 45.833 (rounded up to the nearest whole number, as you cannot sell a fraction of a unit)
Grady must sell 80 units to break even, as 80 units x $300 = $24,000, which covers the total costs of $13,750.