Question
A manufacturer has determined that the combined fixed and variable expenses for the production and sale of 500,000 items are \( \$ 10,000,000 \). What is the price at the breakeven point for this item?
Ask by Kelly Harris. in the United States
Feb 26,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
The breakeven price is $20 per item.
Solution
At the breakeven point, total revenue equals total expenses. This means:
(price per item) × (number of items) = total expenses
Given that total expenses are $10,000,000 and the number of items is 500,000, the equation becomes:
(price per item) × 500,000 = $10,000,000
To find the price per item, divide both sides by 500,000:
price per item = $10,000,000 / 500,000 = $20
Therefore, the breakeven price for this item is $20.
Answered by UpStudy AI and reviewed by a Professional Tutor
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Simplify this solution Mind Expander
To find the breakeven price, you need to divide the total expenses by the number of items. Here, the total expenses are \( \$ 10,000,000 \) and the quantity is \( 500,000 \) items. So, the breakeven price per item is calculated as follows: \[ \text{Breakeven Price} = \frac{\text{Total Expenses}}{\text{Number of Items}} = \frac{10,000,000}{500,000} = \$20 \] Thus, the price at the breakeven point for this item is \( \$20 \). Now, if they sell each item for \( \$20 \), they will cover all their fixed and variable costs, which means they won’t make a profit, but they won’t incur a loss either — that’s the beauty of breakeven!
