Question

Network Systems is introducing a new network card. Suppose Network Systems knows its fixed costs are $600,000, its variable costs are $500 per card, and it must sell 15,000 cards to break even the first year. What is the minimum price per unit it should charge?

Answer 1

$15,000 =\frac{F}{P-V}$

$15,000 =\frac{ \$600,000}{\$500 - V}$

Cross multiply

$15,000(500 - V) =600,000$

$7,500,000 - 15,000V = 600,000$

$-15,000V = 600,000 -7,500,000$

$-15,000V = - 6,900,000$

$V = \frac{-6,900,000}{-15,000}$

$V=460$

The minimum price per unit it should charge is $460