1 A company produces a gear that is commonly used by several

1. A company produces a gear that is commonly used by several lawnmower manufacturing companies. The base cost of operation (rent, utilities, etc.) is S750,000 per year. The cost of manufacturing a gear is $1.35. If these gears are sold at $7.35 each, how many must be sold each year to break even?

Solution

Lets say the company sells x units every year To break even total revenue should equal total cost Total cost 750000 + 1.35x Total revenue 7.35x 750000 + 1.35x = 7.35x 750000 = 6x x = 125000 125000 units must be sold every year to breakeven