An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:
(A) 2,000
(B) 500
(C) 100
(D) 1,000
(E) 800
Answer (2)
To determine the break-even point for this question, we need to understand what the break-even point is. In business, the break-even point is the level of sales at which total revenues equal total costs, meaning the business is not making a profit, but is also not incurring a loss.
Here, we are given:
Fixed Costs (FC) : $10 , 000 per month
Variable Costs (VC) per unit: $50
Revenue per unit: $70
The formula to calculate the break-even point in units is:
Break-even point (units) = Revenue per unit − Variable Cost per unit Fixed Costs
Plug in the values:
Break-even point (units) = $70 − $50 $10 , 000 = $20 $10 , 000 = 500
So, the break-even point volume is 500 units.
Therefore, the correct answer is (B) 500.
The break-even point is calculated to be 500 units, meaning that at this level of sales, total revenue equals total costs. The selected multiple-choice option is (B) 500.
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