What is the break-even point in units if fixed costs are $40,000, selling price

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Question: What is the break-even point in units if fixed costs are $40,000, selling price per unit is $80, and variable cost per unit is $50?

Options:

Correct Answer: 1,000 units

Solution:

Break-even point (units) = Fixed Costs / (Selling Price - Variable Cost) = $40,000 / ($80 - $50) = 1,000 units.

What is the break-even point in units if fixed costs are $40,000, selling price per unit is $80, and variable cost per unit is $50?

What is the break-even point in units if fixed costs are $40,000, selling price per unit is $80, and variable cost per unit is $50?

Step 1: Identify the fixed costs. In this case, the fixed costs are $40,000.
Step 2: Identify the selling price per unit. Here, the selling price is $80.
Step 3: Identify the variable cost per unit. The variable cost is $50.
Step 4: Calculate the contribution margin per unit by subtracting the variable cost from the selling price. This is $80 - $50 = $30.
Step 5: Use the break-even point formula, which is Fixed Costs divided by the contribution margin per unit. This is $40,000 / $30.
Step 6: Perform the division to find the break-even point in units. $40,000 / $30 = 1,333.33.
Step 7: Since you cannot sell a fraction of a unit, round up to the nearest whole number. Therefore, the break-even point is 1,334 units.

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