If a firm has fixed costs of $20,000, variable cost per unit of $.50, and a breakeven point of 5000 units, the price is?
To find the price, we first need to understand the concept of the breakeven point. The breakeven point is the level of production at which a company neither makes a profit nor incurs a loss. It is the point where total revenue equals total cost.
In this case, the fixed costs are $20,000 and the variable cost per unit is $0.50. We know that the breakeven point is 5,000 units.
To find the price, we can follow these steps:
Step 1: Calculate the total cost at the breakeven point.
Total cost at the breakeven point = Fixed costs + (Variable cost per unit * Number of units)
Total cost at the breakeven point = $20,000 + ($0.50 * 5,000)
Total cost at the breakeven point = $20,000 + $2,500
Total cost at the breakeven point = $22,500
Step 2: Calculate the price using the total cost at the breakeven point.
Price = Total cost at the breakeven point / Number of units
Price = $22,500 / 5,000
Price = $4.50
Therefore, the price per unit for the firm is $4.50.