FifeSiete Corp. wants to break even at 15,000 units on its only product. Its unit variable cost is $55, and its fixed cost is $750,000. What should be each unit's selling price?
A) $85
B) $92
C) $105
D) $78

Question

Quizplus · Accepted Answer

To break even, the total revenue must equal the total cost, which is:

Total revenue = Total cost

Let's first calculate the total variable cost:

Total variable cost = Number of units * Unit variable cost

Since FifeSiete Corp. wants to break even at 15,000 units, the total variable cost would be:

Total variable cost = 15,000 units * $55 = $825,000

Now we can calculate the total cost:

Total cost = Fixed cost + Total variable cost

Total cost = $750,000 + $825,000 = $1,575,000

To find the selling price per unit that will break even, we can use the following formula:

Selling price per unit = (Total cost / Number of units) + Unit variable cost

Selling price per unit = ($1,575,000 / 15,000) + $55

Selling price per unit = $105

Therefore, FifeSiete Corp. should set the selling price per unit at $105 to break even at 15,000 units.