Assume a fixed cost for an investment in a piece of equipment of $120,000, a variable cost to produce each unit of product with the equipment at $40, and a selling price for the finished product of $50. What is the break-even in units that would have to be produced and sold for total revenue to equal total cost?

12,000 UNITS

Explanation:

The BEP which is the break even point is the point where the company's sales or revenue generated is equal to the cost incurred.

As such, the BEP is the number of units that must be sold for the company to make neither a profit nor a loss.

Both sales and variable cost are dependent on the number of units sold.  The total cost is the sum of the variable and the fixed cost.

Let the units required to breakeven be y

50y = 40y + 120,000

10y = 120,000

y = 12,000

preferential trade agreement

Explanation:

This agreement is known as a preferential trade agreement. It is called this because it tends to make it easier for specific goods to be traded but only to the countries that are part of the group and/or agreement. This agreement also makes it harder for countries that are not part of the agreement to be able to trade with the countries that are in order to maintain the countries within the agreement trading with each other.