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?

Answer 1

The sale price must be $5.00 per unit in order to break even at the end of the month. This is calculated by taking the fixed cost of $100,000 and dividing it by the number of units (50,000) to get the variable cost per unit ($2.00). Then, add the variable cost per unit ($3.00) to the fixed cost per unit ($2.00) to get the total cost per unit ($5.00).