Question

you own a small manufacturing business that produces widgets. you have spent $600,000 acquiring the fixed assets you need to produce widgets. each widget costs you $20 to make and they sell for $65 each, so your variable cost is 30.8% of the overall revenue. at your current level of operating leverage, how many widgets must you sell to break even? 18,000 7,059 9,231 13,334

Explanation:

Step1: Recall Break - Even Formula

The break - even point (in units) formula is $Q=\frac{FC}{P - VC}$, where $FC$ is the fixed cost, $P$ is the price per unit, and $VC$ is the variable cost per unit. Here, $FC = 600000$, $P=65$, and $VC = 20$.

Step2: Substitute Values into Formula

Substitute the values into the formula: $Q=\frac{600000}{65 - 20}$. First, calculate the denominator: $65-20 = 45$. Then, calculate the numerator divided by the denominator: $Q=\frac{600000}{45}\approx13333.33\approx13334$.

Answer:

13,334