the annual fixed cost for a plant are 100000 and the variabl

the annual fixed cost for a plant are $100,000, and the variable costs are $140000 at 70% with net sales 0f $280,000. What is the breakeven point in units of production if the selling price per unit is $40 ?

> Click Submit to complete this assessment. Question 8 The annual fixed costs for a la t are S100 000, and the varable costs are $140, 7,000 6,000 5,000 4,000 at 70% utilization of ailable capacity with net sales of $280,000 What is the breakeven point in unts Click Submit to complete this assessment 9 e

Solution

Given that the fixed cost = $100,000, and the variable costs = $140000 (70% capacity)

Revenue = $280,000. To find the breakeven point, use the fact that price = average cost. Here AC = TC/Q. And TC = FC + VC. Now sales revenue is 280,000 and price is $40. Hence total units sold are 280,000/40 = 7000 units. When 7000 units are produced, total variable cost is 140,000. Hence variable cost is $20 per unit. This makes AC = (100,000 + 20Q)/Q or 100,000/Q + 20.

Find the breakeven Q

40 = 100,000/Q + 20.

20 = 100,000/Q

Q = 5000

Correct choice is 5000 units.