A company that manufactures automatic blowdown control valve

A company that manufactures automatic blowdown control valves (for applications where boilers are operated unsupervised for 24 to 36 hours) has fixed cost of $180,000 per year and variable cost of $700 per valve. The company expects to sell 18,000 valves per year. Determine the selling price in order for the company to break even. The selling price for the company to break even is determined to be $ ______________per unit.

Solution

Total cost=180000+700Q=180000+700(18000)=180000+12600000=12780000

And total revenue=18000P

Breakeven point is at a quantity where profit is zero.

Thus TR-TC=0

18000P=12780000

Price=12780000/18000=$710