WidgetMaker Has Discovered That Its Fixed Costs Are $100,000 Per

question 34

Multiple Choice

WidgetMaker has discovered that its fixed costs are $100,000 per month.If WidgetMaker sells its widgets for $35 per unit based upon a cost of $15 per unit to manufacture (variable costs) then how many widgets per year must WidgetMaker sell in order to break-even?

• A) 5,000
• B) 34,286
• C) 60,000
• D) None of the above

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Definitions:

Variable Costs

Costs that change in proportion to the level of goods or services produced.

Sales Volume

The quantity of products or services sold by a company during a certain period of time.

Cost Advantage

The benefit or upper hand a business gains when it can provide a product or service at a lower price than its competitors, often through efficiencies, economies of scale, or lower input costs.

Fixed Cost

A business expense that remains constant regardless of the level of production or business activity, such as rent or salaries.