Posted by Rick on Sunday, February 19, 2012 at 8:53pm.
The Oliver Company plans to market a new product. Based on its market studies, Oliver estimates that it can sell up to 4,500 units in 2005. The selling price will be $2 per unit. Variable costs are estimated to be 20% of total revenue. Fixed costs are estimated to be $6,400 for 2005. How many units should the company sell to break even?
How do I calculate the units to break even? What type of formula do I use?

Algebra  Steve, Monday, February 20, 2012 at 11:07am
revenue = units * price/unit
r = 2x for x units
var cost = .2r
fix cost = 6400
total cost c = 6400 + .2(2x)
total revenue = 2x
breakeven when cost = revenue
2x = 6400 + .4x
1.6x = 6400
x = 4000
so, at 4000 units,
revenue = 8000
cost = 6400 + .2(8000) = 8000
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