Asked by Shelby Bliss on Jul 12, 2024
Verified
A business produces 5,000 units per month.It spends $12,000 on raw materials.It pays wages of $20,000.Other costs include $50,000 for rent,paid by the month.In order to break even the selling price per unit will have to be:
A) $25.20
B) $16.4
C) $20.30
D) $28
Break Even
The point at which total costs and total revenue are equal, resulting in no net loss or gain for a business.
Selling Price
The amount of money for which a product or service is sold to customers.
Raw Materials
The basic materials from which products are made, typically unprocessed or minimally processed before being used in manufacturing processes.
- Determine the volumes required for break-even and appreciate their significance.
- Identify the role of the contribution margin in shaping pricing and profitability strategies.
Verified Answer
JC
Jiale ChangJul 14, 2024
Final Answer :
B
Explanation :
To calculate the break-even selling price per unit, add all the costs together ($12,000 for raw materials + $20,000 for wages + $50,000 for rent = $82,000 total costs) and divide by the number of units (5,000). This gives $82,000 / 5,000 = $16.4 per unit.
Learning Objectives
- Determine the volumes required for break-even and appreciate their significance.
- Identify the role of the contribution margin in shaping pricing and profitability strategies.