A production run of toothpaste requires a fixed cost of $100,000. The variable cost per unit is $3.00. If 50,000 units of toothpaste will be sold during the next month, what sale price must be chosen in order to break even at the end of the month? Note: please report the result as a whole number, rounding if necessary and omitting the decimal point.
To calculate the break-even sale price, we need to consider both the fixed cost and the variable cost per unit.
The fixed cost is given as $100,000, which means that this amount must be covered in order to break even.
The variable cost per unit is $3.00, which means that for each unit produced and sold, $3.00 is spent on variable costs.
Given that 50,000 units of toothpaste will be sold, we can determine the total variable costs:
Total Variable Cost = Variable Cost per Unit * Number of Units
Total Variable Cost = $3.00 * 50,000
Total Variable Cost = $150,000
Now, to break even, the total revenue from sales should cover both the fixed and variable costs.
Total Cost = Fixed Cost + Total Variable Cost
Total Cost = $100,000 + $150,000
Total Cost = $250,000
Therefore, the sales revenue must be at least $250,000 in order to break even.
Since we know that 50,000 units will be sold, we can calculate the required sale price per unit to reach the target revenue:
Required Sale Price per Unit = Total Cost / Number of Units
Required Sale Price per Unit = $250,000 / 50,000
Required Sale Price per Unit = $5.00
Therefore, the sale price per unit of toothpaste must be $5.00 to break even at the end of the month. We report this as a whole number, rounding if necessary, and omitting the decimal point, so the answer is $5.
To calculate the break-even sale price, we need to consider the fixed cost and the variable cost.
The fixed cost is given as $100,000.
The variable cost per unit is $3.00.
If 50,000 units of toothpaste will be sold during the next month, then the total variable cost can be calculated as:
Total Variable Cost = Variable Cost per Unit × Number of Units
Total Variable Cost = $3.00 × 50,000
Total Variable Cost = $150,000
To break even, the total revenue must cover both the fixed cost and the total variable cost.
Total Revenue = Fixed Cost + Total Variable Cost
Total Revenue = $100,000 + $150,000
Total Revenue = $250,000
Therefore, the sale price must be chosen such that the total revenue is $250,000.
Please note that the sale price is the revenue per unit.
Sale Price = Total Revenue / Number of Units
Sale Price = $250,000 / 50,000
Sale Price = $5.00
Thus, the sale price must be chosen as $5.