A firm has fixed costs of $200,000 and variable costs per unit of $6.It plans on selling 40,000 units in the coming year.To realize a profit of $20,000,the firm must have a sales price per unit of at least
A)$11.00.
B)$11.50.
C)$10.00.
D)$10.50.

Question

Quizplus · Accepted Answer

To calculate the break-even point, we need to add the fixed cost to the cost of producing the units.

Total cost = Fixed cost + Variable cost
Total cost = $200,000 + ($6 x 40,000)
Total cost = $440,000

To achieve a profit of $20,000, we need to add this to the total cost:
Total cost + Profit = $440,000 + $20,000
Total cost + Profit = $460,000

To calculate the price per unit, we divide the total cost and profit by the number of units:
Price per unit = (Total cost + Profit) / Number of units
Price per unit = ($460,000) / (40,000) 
Price per unit = $11.50

Therefore, the firm must have a sales price per unit of at least $11.50 to realize a profit of $20,000.

A Firm Has Fixed Costs of $200,000 and Variable Costs