A firm sells two products, one call cogs and the other called sprocket. The firm has a fixed cost of $100,000.00 per year. Each cog costs $8 to produce but can be sold in the market for $18. Each sprocket costs $22 to product, and has a market price of $40. 5 cogs are sold for every 7 sprockets. The production facility of the firm can produce any number of sprockets and cogs required.
What is the break-even production of the firm in terms of sprockets and cogs sold?
Using BE=fixed costs/price-Variable cost per unit I assume with two products you add both prices to make the price and then subtract the summation of the costs. Then how is the 5 out of 7 figured out?