Question

If a firm has fixed costs of $30,000, a variable cost per unit of $.75, and a break-even point of 5,000 units, the sales price per unit is ________.

Answer 1

The sales price per unit will be $6.75.

Step-by-step explanation:

The break even point is where the total revenue is total cost such that profit equals zero.

The break even level of output is 5,000 units.

The fixed costs is $30,000.

The variable cost per unit is $.75.

The total variable cost is

=
`.75\ *\ 5,000`

= $3750

The total cost will be

= $30,000 + $3,750

= $33,750

Which is also equal to total revenue

Now,

Total revenue =
`Price\ *\ Quantity`

$33,750 =
`Price\ *\ 5,000`

Price =
`(33,750)/(5,000)`

Price = $6.75