Question

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

Answer 1

Answer:

$6,666.67 units

Explanation:

Given:

Selling Price = $50

Cost Price = $35

Equipment (Fixed cost) = $100,000

Break-even point = ?

Computation of break-even point:

Break-even point = Fixed cost / [Contribution price]

Break-even point = Fixed cost / [Selling Price - Cost Price]

Break-even point = $100,000 / [$50 - $35]

Break-even point = $100,000 / [$15]

Break-even point = 6,666.67 (Approx) units