An engineer of a manufacturing company has determined the costs of producing a new product to...
An engineer of a manufacturing company has determined the costs of producing a new product to be as follows:
Equipment cost: $600,000/year
Variable cost per unit of production: $17.00
Overhead cost: $60,000/year
The company is going to this project for 5 years and estimated that the product can be sold for a unit price of $45. How many units must they produced and sold each year to break even?
Homework Answers
Ans:
Break even point(Units) = 23,572 units
Explanation
Contribution per unit = selling price per unit - variable cost per unit
= $45 - $17
= $28
Fixed cost = $600,000 + $60,000
= $660,000
Break even point(Units) = Fixed cost / Contribution per unit
= $660,000 / $28
= 23,572 units
Number of units they must produce and sale each year to break even is 23,572 units.
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