A manager has determined that a potential new product can be sold at a price of $100.00 each. The cost to produce the product is $75.00, but the equipment necessary for production must be leased for $175,000 per year. What is the break-even point?
A) 3,000 units.
B) 5,000 units.
C) 7,000 units.
D) 10,000 units.
E) 25,000 units.

Question

Quizplus · Accepted Answer

Break-even point = (Fixed costs) / (Price - Variable costs)

Fixed costs = Equipment lease = $175,000 per year

Variable costs = Cost to produce each unit = $75.00

Price = $100.00

Break-even point = (175,000) / (100 - 75) = 7,000 units.

A Manager Has Determined That a Potential New Product Can