What is the break-even point in units if fixed costs are $50,000, variable cost per unit is $20, and selling price per unit is $50?

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Q: What is the break-even point in units if fixed costs are $50,000, variable cost per unit is $20, and selling price per unit is $50?

Solution: Break-even point = Fixed Costs / (Selling Price - Variable Cost) = 50,000 / (50 - 20) = 1,000 units.

Steps: 8

Step 1: Identify the fixed costs. In this case, the fixed costs are $50,000.
Step 2: Identify the variable cost per unit. Here, the variable cost per unit is $20.
Step 3: Identify the selling price per unit. The selling price per unit is $50.
Step 4: Calculate the contribution margin per unit. This is done by subtracting the variable cost from the selling price: $50 (selling price) - $20 (variable cost) = $30.
Step 5: Use the break-even formula. The formula is: Break-even point (in units) = Fixed Costs / Contribution Margin per unit.
Step 6: Plug in the numbers: Break-even point = $50,000 / $30.
Step 7: Calculate the break-even point: $50,000 divided by $30 equals approximately 1,666.67 units.
Step 8: Since you can't sell a fraction of a unit, round up to the nearest whole number, which is 1,667 units.