In order to produce a new product, a firm must lease equipment at a cost of $10,000 per year. the managers feel that they can sell 5,000 units per year at a price of $7.50. what is the highest variable cost that will allow the firm to at least break even on this project?

$5.5

Explanation:

The fixed cost of equipment = $10,000

Let the variable cost per unit be = $x

Total units that can be sold per year =  5,000

Total variable cost for all the units = $x × 5,000

                                                         = $5,000x

Total revenue per year:

= $7.50 × 5,000

= $37,500

To achieve at least break even point, the total must be at least 0.

Total profit = Total revenue - Total cost

0 = $37,500 - ($10,000 + $5,000x )

5,000x = $37,500 - $10,000

x = $5.5

Hence the highest variable cost per unit can be $5.5 for the firm to at least break even on the project.

what is wrong with black soap shampoo?

explanation:

answer; risk transference;