Question

Bill’s Mechanical Devices Inc. produces robots for the automotive industry. If its average variable costs are given by AVC = 25, its fixed costs are $2,500, and it charges $75 a robot, what is Bill’s break-even level of output?

Answer 1

Answer:

50 units

Explanation:

The computation of the break even level of output is given below:

TVC = AVC × Q

= 25 × Q

Total cost is

= TVC + FC

= 25Q + $2,500

Total revenue is

= P × Q

= 75Q

Now in Break even

TR = TC

75Q = 25Q + $2,500

Q = $2,500 ÷ 50Q

= 50 units