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goji.go goji.go
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11 years ago
Total fixed costs are $300. The selling price is $15. Average variable costs are $5. The break-even volume of production is ________ units.
A) 60
B) 40
C) 30
D) 20
E) 15
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Diesel
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wrote...
#1
Valued Member
On Hiatus
11 years ago
Break-even production is the production which covers the costs (zero profit).

Selling price is 15, and the average variable cost for each product is 5. So, the profit from each product is 15 - 5 = 10$.
We need to cover the fixed cost 300$. Apparently, if the production is 30 units, then the profits are 30*10=300$, which covers the costs. (answer: c)

(note: the variable cost was subtracted from the price, and therefore it wasn't included to the costs that had to be covered.)
Answer accepted by topic starter
goji.go Authorgoji.go
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#2
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Posts: 5977
Rep: 293 0
11 years ago
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Diesel

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