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A business has fixed costs of $50,000 and a contribution margin of $10 per unit.
A business has fixed costs of $50,000 and a contribution margin of $10 per unit. How many units must be sold to break even?
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Practice Questions
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Q1
A business has fixed costs of $50,000 and a contribution margin of $10 per unit. How many units must be sold to break even?
5,000
4,000
6,000
3,000
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Break-even point (units) = Fixed costs / Contribution margin = $50,000 / $10 = 5,000 units
Questions & Step-by-step Solutions
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Q
Q: A business has fixed costs of $50,000 and a contribution margin of $10 per unit. How many units must be sold to break even?
Solution:
Break-even point (units) = Fixed costs / Contribution margin = $50,000 / $10 = 5,000 units
Steps: 6
Show Steps
Step 1: Identify the fixed costs of the business. In this case, the fixed costs are $50,000.
Step 2: Identify the contribution margin per unit. Here, the contribution margin is $10 per unit.
Step 3: Use the break-even formula, which is: Break-even point (units) = Fixed costs / Contribution margin.
Step 4: Plug in the numbers: Break-even point (units) = $50,000 / $10.
Step 5: Calculate the result: $50,000 divided by $10 equals 5,000 units.
Step 6: Conclude that the business must sell 5,000 units to break even.
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