Use a general formula for break even: Price - (fixed overhead + unit costs) = Profit. Or Price - fixed overhead - unit costs = profit. For break even, profit is 0. Remember, the firm sells everything it produces, so x is both the units produced and the units sold. They're the same.
P - price
X - units
C - unit cost
Px - 216000 - Cx = 0
Fact 1:
Tells us there is a $250 additional overhead (unit cost) for every 100 units produced.
Px - 216000 - 250(x/100) = 0
One equation, two unknowns. Not sufficient.
Fact 2:
Tells us the firm must produce 500 units per month. It doesn't say "at least", so 500 is the number of units (x in our equation) it produces (and sells).
6000P - 216000 - 6000C = 0
One equation, two unknowns, not sufficient.
1 & 2
We know both that 500 units are produced per month, and that the unit cost is 250 for every 100 units: 250*(x/100).
6000P - 216000 - 250*(6000/100) = 0
One equation, one unknown, solve for P. Both together are sufficient.
Last edited by
fcabanski on Fri Oct 14, 2011 9:23 am, edited 1 time in total.
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