Answer:
The break-even level of output is 120 units.
Explanation:
Since Total Cost formula is provided, we can use elements contained in the formulae to determine the break-even level of output.
The break-even level of output is the level of activity where a firm makes neither a Profit nor a Loss. In other words, Profit = $0
Step 1 : Collect data
So given :
TC = 2,400 + 100 Q
This means :
Fixed Costs = $2,400
Variable Costs = $100 per unit
Additional Information gives :
Selling Price per unit = $120
Step 2 : Determine the break-even level of output
Break even (units) = Fixed Costs ÷ Contribution per unit
where,
Contribution per unit = Selling Price - Variable Cost
= $20
thus,
Break even (units) = $2,400 ÷ $20
= 120 units
Conclusion :
The break-even level of output is 120 units.
