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2 April, 06:44

A small business invests $9,900 in equipment to produce a product. Each unit of the product costs $0.65 to produce and is sold for $1.20. How many units of the product must be sold before the revenue received equals the total expense of production, including the initial investment in equipment?

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  1. 2 April, 09:11
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    To break even the company must sell

    Explanation:

    The position at which the company is at no profit and loss position then it is said that the company is at breakeven position.

    Break-even position can be found from the following position:

    Breakeven position = Fixed cost / contribution per unit

    The fixed cost here is initial investment which is $9900 and the contribution can be found by taking the difference between selling price per unit and variable cost per unit. The contribution per unit is $0.55 per unit ($1.2 - $0.65). By putting values in the above equation we have:

    Breakeven position = $9900 / $0.55 per unit = 18000 Units

    So 18000 units are required to sell to reach at a no profit no loss position.
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