You are determining whether to add a new product to an exist

You are determining whether to add a new product to an existing
facility. You determine the fixed cost will be $50,000 for the year to add up to 1000
units of capacity per month. Variable cost will be $10 per unit. You
believe demand will be 800 units per month at a price of $20 per unit.
What is the break-even point?

$10

5,000 per month

417 per month

none of the above

Solution

Break Even Point Sales = fixed costs / (selling price - Variable cost per unit)

Therefore total fixed costs = $ 50000

Variable costs per unit = $ 10

Selling price per unit = $20

Applying the values in the formulea = 50000 / ( 20- 10) = 5000 units

Option B is the answer