A manager has determined that a potential new product can be sold at a price of $10.00 each. The cost to produce the product is $5.00, but the equipment necessary for production must be leased for $25,000 per year. What is the break-even point?
A) 2,500 units.
B) 5,000 units.
C) 7,500 units.
D) 10,000 units.
E) 25,000 units.

Question

Quizplus · Accepted Answer

The break-even point is calculated by dividing the fixed costs by the profit per unit. The profit per unit is the selling price minus the cost to produce, which is $10.00 - $5.00 = $5.00. The fixed cost is the equipment lease, which is $25,000. Therefore, the break-even point is $25,000 / $5.00 = 5,000 units.

A Manager Has Determined That a Potential New Product Can