Question

Mansfield Pharmaceuticals markets Zipro, an antibiotic. The firm has fixed costs of $1,000,000 and variable costs of $2 per bottle of 50 tablets priced at $10 per bottle. What is the break-even volume?

Answer 1

Answer:

Break-even volume is 125,000 bottles

Explanation:

The formula for break-even quantity (BEQ) is given by:

BEQ = FC / (P - VC)

Where:

• FC = fixed cost
• P = price
• VC = variable cost

Plug in the numbers we got

BEQ = 1,000,000 / (10 - 2) = 125,000

So to break even Mansfield Pharmaceuticals needs to sell 125,000 bottles of Zipro