In order to produce a new product, a firm must lease equipment at a cost of $10,000 per year. the managers feel that they can sell 5,000 units per year at a price of $7.50. what is the highest variable cost that will allow the firm to at least break even on this project?

$5.5

Explanation:

The fixed cost of equipment = $10,000

Let the variable cost per unit be = $x

Total units that can be sold per year =  5,000

Total variable cost for all the units = $x × 5,000

                                                         = $5,000x

Total revenue per year:

= $7.50 × 5,000

= $37,500

To achieve at least break even point, the total must be at least 0.

Total profit = Total revenue - Total cost

0 = $37,500 - ($10,000 + $5,000x )

5,000x = $37,500 - $10,000

x = $5.5

Hence the highest variable cost per unit can be $5.5 for the firm to at least break even on the project.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

watch how they communicate and watch how they handle their free time

hope it !