APICS Certified in Logistics, Transportation and Distribution (CLTD) — Question 83

An organization can purchase equipment for $450,000 in order to make an item for $20 per unit. A supplier can produce the same item for $25. If the item will sell for $35 per unit, what is the break-even point for the item?

Answer options

• A. 18,000 units
• B. 30,000 units
• C. 45,000 units
• D. 90,000 units

Correct answer: B

Explanation

The break-even point is calculated by determining the number of units that must be sold to cover the fixed and variable costs. In this case, the organization must sell 30,000 units to break even, as it needs to cover the initial investment of $450,000 against the profit made per unit sold. The other options represent incorrect calculations based on the cost and selling price dynamics.