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A rotational molding operation has fixed costs of $6,000 per year and variable costs of $53 per unit. If the pracess is automated via conveyor, its fixed cost will be $45,000 per year, but its variable cost will be only $10 per unit. Determine the number of units each year necessary for the two operations to break even. The number of units each year necessary for the two operations to break even is determined to be

Answer :

1098 units are found to be the number of units required annually for the two operations to Break even point.

Break even point in the point where total cost of both operation is equal.

Let the number of units be x.

$6000 + $51 x = $ 51000 + $10x

41x=45000

x = 1097.56= 1098.

Hence the number of units per year necessary are 1098 units

By comparing the market price of an asset to its initial cost, the break-even point (break-even price) for a trade or investment can be identified. The break-even point is reached when the two prices are equal.

In corporate accounting, the break-even point is calculated by dividing Break even point the total fixed production costs by the revenue per unit less the variable production costs per unit. Fixed costs in this context relate to expenses that are constant regardless of the quantity of units sold. The production level at which total sales for a product equal total expenses is known as the break-even point.

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