A Company Manufactures a Product and Sells It for $120

question 62

Essay

A company manufactures a product and sells it for $120 per unit. The total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. What is the company's break-even point in (a) units and (b) dollar sales?

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold in a marketplace.

Strike Price

The predetermined price at which someone holding an option has the right to purchase (if it is a call option) or sell (if it is a put option) the specific asset or commodity.

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other assets at a specified price within a specific time period.

Exercise Price

The specified price at which the holder of an option can buy or sell the underlying security.