Bill's Mechanical Devices Inc.produces robots for the automotive industry.If its average variable costs are given by AVC = 25,its fixed costs are $2,500,and it charges $75 a robot,what is Bill's break-even level of output?
A) 25 robots.
B) 33.3 robots.
C) 50 robots.
D) 75 robots.
E) 100 robots.

Question

Quizplus · Accepted Answer

To find the break-even level of output, we need to determine the number of robots Bill's Mechanical Devices Inc. needs to sell to cover its total costs, both variable and fixed costs.

The break-even point can be calculated using the following formula:

Break-even output = Total fixed costs / (Price per unit - Average variable cost per unit)

Substituting the given values:

Break-even output = 2500 / (75 - 25) = 50 robots

Therefore, Bill's Mechanical Devices Inc. needs to sell 50 robots to reach the break-even point.