COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A computer manufacturing business is planning to open a new factory. It will have annual fixed costs of $1 million. The average variable cost of each computer will be $100 and the business plans to sell them for $350 each. The expected break-even level of output will be ____ units per year
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1000
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2500
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4000
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10000
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Explanation:
Detailed explanation-1: -First, add up all of your production costs. Make sure to be clear about which costs are fixed and which ones are variable. Take your total cost of production and subtract your variable costs multiplied by the number of units you produced. This will give you your total fixed cost.
Detailed explanation-2: -Variable costs are the sum of all labor and materials required to produce a unit of your product. Your total variable cost is equal to the variable cost per unit, multiplied by the number of units produced. Your average variable cost is equal to your total variable cost, divided by the number of units produced.
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