A manufacturing company produces a gadget with a fixed cost of $15,000. The variable cost per unit is $50, and each gadget sells for $100. If the company decides to increase production by 100 units, what will be the impact on their marginal cost, and what is the new breakeven point in units?

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Seekh · Accepted Answer

The marginal cost is the extra cost of making one more gadget, which is just the variable cost per unit, so it stays at $50 even if the company makes 100 more units. Because the marginal cost doesn’t change, the breakeven formula is unchanged: breakeven units = fixed cost ÷ (price – variable cost). Plugging in the numbers gives 15,000 ÷ (100 – 50) = 300 units. Thus, after adding 100 units, the marginal cost remains $50 and the breakeven point stays at 300 gadgets. For example, if the company now produces 400 gadgets, it still needs to sell 300 to cover all costs.

A manufacturing company produces a gadget with a fixed cost of $15,000. The variable cost per unit is $50, and each gadget sells for $100. If the company decides to increase production by 100 units, what will be the impact on their marginal cost, and what is the new breakeven point in units?

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