Posted on by Judy

Problem 7-9 A manufacturing process has a fixed cost of $150,000 per month. Each unit of product being produced contains $31 worth of material and takes $42 of labor. How many units are needed to break even if each completed unit has a value of $80? (Roundup your answer to the next whole number.) Break even point units

Fixed cost (FC) = $150000
Total Variable cost (VC) = material cost + labor cost = $31+$42 = $73 per unit
Revenue (R) = $80 per unit
Break even point = FC / (R – VC)
= 150000 / (80-73)
= 150000 / 7
= 21428.57 or rounded to 21429 units
 
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