To be profitable, a firm has recover its costs. These costs include both its fix

Question

To be profitable, a firm has recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit Consider the case of Dynamic Defenses Corporation: Dynamic Defenses Corporation is considering a project that will have fixed costs of $15,000,000. The product will be sold for $32.50 per unit, and will incur a variable cost of $10.75 per unit. Given Dynamic Defenses's cost structure, it will have to sell 689,655 units to break even on this project (OBE

Explanation / Answer

Break-even units = Fixed Costs / (Price - Variable Cost) = 15,000,000 / (32.50 - 10.75) = 689,655 units

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