A company is considering producing a product for a new market.The fixed costs required for manufacturing and delivering the product is $50,000.Labor and material costs are estimated to be approximately $25.00 per product.If the product is sold for $35.00 each,the firm's break-even volume would be
A)50,000 units
B)5,000 units
C)2500 units
D)500 units

Question

Quizplus · Accepted Answer

To calculate the break-even volume, we need to determine the number of products the company needs to sell to cover its total costs.

Total costs = fixed costs + variable costs

Variable costs = labor costs + material costs

Variable costs per unit = $25.00

Total costs = $50,000 + ($25.00 x number of units)

Selling price per unit = $35.00

To break even:

$35.00 x number of units = $50,000 + ($25.00 x number of units)

$10.00 x number of units = $50,000

Number of units = $50,000/$10.00 = 5,000 units

Therefore, the firm's break-even volume would be 5,000 units, which is option B.

A Company Is Considering Producing a Product for a New