Variable and fixed cost question

Question

Market research for a new product indicates that it can be sold for $65 per unit. The variable cost is $45 and the fixed cost per month is $8640.

a. How many units must they sell to break even?

b. How many units must they sell to make a profit of $9500?

c. What would be the profit or loss if they sold 405 units?

Answer 1

FC = 8640 = fixed cost

VC = 45x - variable cost

TC = FC + VC = 8640 + 45x

Price= P = 65,

R= Px = 65x = Total Revenue

break even point is when Total Revenue = Total Cost

65x = 45x + 8640

20x = 8640

x = 8640/20 = 432 units to breakeven

profit = 9500 = R - C = 65x -45x - 8640 = 20x - 8640

20x = 9500 + 8640 = 18,140

x = 18140/20 = 907 units to make $9,500 profit

R-C = 20(405) - 8640 = 8100 - 8640 = -540 = loss of $540 with 405 units