Amex Ltd sells its product for $25 each. This year, Amex’s fixed cost totals $100679. The variable cost per product is $11.What is the break-even point in number of products?
Question
Amex Ltd sells its product for 100679. The variable cost per product is $11.What is the break-even point in number of products?
Solution
The break-even point is the point at which total revenue equals total costs, resulting in neither profit nor loss.
To calculate the break-even point in units, you can use the formula:
Break-even point in units = Total Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)
Given in the problem:
Total Fixed Costs (TFC) = 25 Variable Cost per Unit (VC) = $11
Substitute these values into the formula:
Break-even point in units = 25 - $11)
Solve the equation:
Break-even point in units = 14
Break-even point in units = 7191.36
Since you can't sell a fraction of a product, you would need to sell approximately 7192 products to break even.
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