Lester Co. produces toys kites. It has a fixed cost of $62,150. If the selling price per unit is $9.50 and the variable cost per unit is $6.25. The breakeven point is:

Question

anonymous · Answer

I saw someone put on here that you put the 2 equations together to solve for x: 9.50x=6.25x+62150 but I don't really understand why we're adding the variable cost to the fixed cost...

Mercury · Answer

at the breakeven point, revenue = cost

using the equation, they put 9.50x on the left side to represent the total revenue (selling price times # of units) and on the right side, 6.25x + 62150 (cost per unit times # of units, plus the fixed cost)

the equation is setup so that you can solve for the x-value (a.k.a the # of units) that satisfies the breakeven point