A producer with only one product has total fixed costs of $15,000 per month. In addition, it cost the producer $100 in variable costs to produce each unit of his product (raw materials and direct labor cost). The producer charges his wholesalers $125 per unit. What is the sales amount to break even

$75,000

Explanation:

The BEP which is the break even point is the point where the company's sales or revenue generated is equal to the cost incurred. As such, the BEP is the number of units that must be sold for the company to make neither a profit nor a loss.

Both sales and variable cost are dependent on the number of units sold.

The sales less the variable cost gives the contribution margin. The contribution margin less the fixed cost gives the net operating income.

Let the number of units that must be sold to break even be y

125y - 100y - 15,000 = 0

25y = 15,000

y = 15000/25

y = 600

The sales amount to breakeven

= 600 * $125

= $75,000

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