Clay Industries, a large industrial firm, is evaluating the sales of its existing line of coiled machine tubing. In their analysis, the operating managers of Clay
Industries have identified the following information related to the coiled machine tubing division and its product: Annual fixed operating expenses of $925,000
Average variable cost of $90 Break-even quantity of 20,109 units Which of the following best describes the average variable cost for this product?
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A. B. C. D. E. F.A
To calculate the break-even quantity for a product, use the following equation: {Fixed operating costs/[avg. sales price per unit - variable cost per unit]}. To determine the average selling price of this product, we must rearrange the standard equation using algebra, in a manner such that the resulting equation resembles the following: {[$925,000/20,109] + X = $90}. This equation is further rearranged into the following: {$46 + X = $90}. Finally, the ending equation becomes: {X = $90 - $46}. Solving for X yields an average variable cost per unit of $44.