A firm manufactures power steering units. The Rent on the building is 1,000,000 per year. The administrative costs that will be incurred even if a single unit is not sold is $500,000 for the year. Salaries for people who cannot be let go are $500,000 for the year. Raw materials for each unit costs $1,000 for each unit. Labor hired only for working on the units (they will get let go if no units sell) is $250 per unit. Electricity and other costs spent directly on the units is $250 per unit. If each unit sells for $3,000 per unit, what is the break even number of units that must be sold?

A firm manufactures power steering units. The Rent on the building is 1,000,000 per year. The administrative costs that will be incurred even if a single unit is not sold is $500,000 for the year. Salaries for people who cannot be let go are $500,000 for the year. Raw materials for each unit costs $1,000 for each unit. Labor hired only for working on the units (they will get let go if no units sell) is $250 per unit. Electricity and other costs spent directly on the units is $250 per unit. If each unit sells for $3,000 per unit, what is the break even number of units that must be sold?

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Proudction Costs

Section: Chapter Questions

Problem 8SQP

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