Answer to Question #288392 in Economics for Sevi

Question

A fabrication company engaged in production of a motor part has a production capacity of 700, 000

pieces per year. But, it is just operating at 62% of its full capacity due to unavailability to finance the

importation of their materials. The company has an annual income of P 430, 000.00, annual fixed cost

are P 190, 000.00 and variable costs are P 0.348 per unit. How many productions of parts must be

produced for break-even point?

Answer 1

The price is:

$P = (TP + TC)/Q = (430,000 + 190,000 + 0.348×0.62×700,000)/(0.62×700,000) = 1.777.$

The break-even point is:

$Q = 190,000/(1.777×(1 - 0.348)) = 163,990.4$ units.