In a case study, a company has total fixed costs of $100,000 and sells its product for $25. If the variable cost per unit is $15, how many units must be sold to break even?
Practice Questions
1 question
Q1
In a case study, a company has total fixed costs of $100,000 and sells its product for $25. If the variable cost per unit is $15, how many units must be sold to break even?
5,000 units
10,000 units
15,000 units
20,000 units
Break-even point in units = Fixed Costs / (Selling Price - Variable Cost) = $100,000 / ($25 - $15) = 10,000 units.
Questions & Step-by-step Solutions
1 item
Q
Q: In a case study, a company has total fixed costs of $100,000 and sells its product for $25. If the variable cost per unit is $15, how many units must be sold to break even?
Solution: Break-even point in units = Fixed Costs / (Selling Price - Variable Cost) = $100,000 / ($25 - $15) = 10,000 units.
Steps: 7
Step 1: Identify the total fixed costs. In this case, it is $100,000.
Step 2: Identify the selling price per unit. Here, it is $25.
Step 3: Identify the variable cost per unit. In this case, it is $15.
Step 4: Calculate the contribution margin per unit by subtracting the variable cost from the selling price: $25 - $15 = $10.
Step 5: Use the break-even formula: Break-even point in units = Fixed Costs / Contribution Margin.
Step 6: Plug in the numbers: Break-even point in units = $100,000 / $10.
