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A company faces fixed costs of $100,000 and variable costs of $8 per unit. It plans...

A company faces fixed costs of $100,000 and variable costs of $8 per unit. It plans to directly sell its product in the market for $12. How many units must it produce and sell to break even? Show your math.

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Answer #1

If company wants to sell it at break even, then the cost price and selling price will be equal.

If variable cost is $8 per unit and selling price is $12, then

Fixed price per unit = selling price - variable cost

= 12 - 8

= $4

To find number of units,

Number of units to be sold = Total fixed cost / fixed cost per unit

= 100000/ 4

= 25000 units.

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