If a firm has a price of $6.00, a variable cost per unit of $4.00, and a break-even point of 40,000 units, fixed costs are equal to _____.
A)$27,000
B)$90,000
C)$80,000
D)$50,000

Question

Quizplus · Accepted Answer

We can use the formula for break-even point to solve for fixed costs:

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

Substituting the given values:

40,000 units = Fixed costs / ($6 - $4)

40,000 units = Fixed costs / $2

Fixed costs = 40,000 units x $2 = $80,000

Therefore, the answer is C) $80,000.

If a Firm Has a Price of $6