If each unit of output can be sold at a price of $5 and incurs variable costs which are constant at $3 per unit, and if the fixed costs already incurred are $15,000, then the break-even output is:

Question

Keenan

Business

2 October, 20:24

If each unit of output can be sold at a price of $5 and incurs variable costs which are constant at $3 per unit, and if the fixed costs already incurred are $15,000, then the break-even output is:

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Answers (1)

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Paloma Irwin · Answer 1

the break-even output is 5,000 units

Explanation:

Total cost = fixed cost + variable cost = $15,000 + number of units * $3

Sales = number of units * price = number of unit * $5

Break-even output is number of output which generate sales equals to total cost

Sales = Total cost

⇔ number of unit * $5 = $15,000 + number of units * $3

⇔ number of unit * (5-3) = 15,000

⇒ number of unit = 15000/3 = 5,000