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A product is currently made in a job shop, where fixed costs are $20,000 per year...

A product is currently made in a job shop, where fixed costs are $20,000 per year and variable cost is $150 per unit. The firm sells the product for $175 per unit. What is the break-even point for this operation? What is the profit (or loss) on a demand of 150 units per year?

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Answer #1

Given,

fixed costs are $20,000 per year

variable cost is $150 per unit.

Selling Price Per Unit $175 per unit

Demand 150 units per year

Breakeven Point =?

profit (or loss) =?

Workings: Contribution Per Unit = Selling Price-Cost Price

=$175-$150=$25

Break Even Point = Fixed Cost/ Contribution Per Unit

=$20000/$25= 800 unit

profit (or loss) = Fixed Cost-Contribution

=$20000-$25*150unit= $16250(Loss)

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