A manager has determined that a potential new product can be sold at a price of $50.00 each. The cost to produce the product is $35.00, but the equipment necessary for production must be leased for $100,000 per year. What is the break-even point?
A) 3,333 units.
B) 5,000 units.
C) 6,667 units.
D) 7,500 units.
E) 8,167 units.

Question

Quizplus · Accepted Answer

To calculate the break-even point, we need to find out how many units must be sold to cover the lease cost plus the cost of producing each unit and still make a profit of $0.

Let X be the number of units sold.

The total cost (TC) is:

TC = lease cost + (cost to produce each unit * number of units)

TC = $100,000 + ($35.00 * X)

The total revenue (TR) is:

TR = price per unit * number of units

TR = $50.00 * X

At the break-even point, TC = TR:

$100,000 + ($35.00 * X) = $50.00 * X

Solving for X:

$100,000 = $15.00 * X

X = 6,667 units

Therefore, the break-even point is 6,667 units, which corresponds to option C.

A Manager Has Determined That a Potential New Product Can