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Unit price:- 10 dollars Quantity produced:- 200000 units Fixed costs :- 100000 dollars
Unit price:- 10 dollars Quantity produced:- 200000 units Fixed costs :- 100000 dollars . Total variable cost:- 400000 dollars. Required :- 1- Calculate break even-volume
2- Calculate the product price if you want to break even at 100000 units. Explain your answer.
Expert Solution
1) Computation of Break-even Volume:
Break-even Volume = Fixed Cost / Contribution Margin per Unit
Here,
Fixed Cost = $100,000
Contribution Margin per Unit = $10 - ($400,000/200,000 units) = $10 - $2 = $8 per unit
Break-even Volume = $100,000/$8 = 12,500 units
2) Computation of Product Price:
Break-even Volume = Fixed Cost / Contribution Margin per Unit
100,000 = $100,000/(Product Price - $2)
100,000*(Product Price - $2) = $100,000
100,000*Product Price - $200,000 = $100,000
100,000*Product Price = $100,000+$200,000
Product Price = $300,000/100,000 = $3 per unit
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