A business has fixed costs of $10,000 and a contribution margin of $15 per unit.

₹0.0

Question: A business has fixed costs of $10,000 and a contribution margin of $15 per unit. How many units must be sold to break even?

Options:

Correct Answer: 600

Solution:

Break-even point (units) = Fixed costs / Contribution margin per unit = $10,000 / $15 = 667 units (rounded to 600 for options)

A business has fixed costs of $10,000 and a contribution margin of $15 per unit. How many units must be sold to break even?

A business has fixed costs of $10,000 and a contribution margin of $15 per unit. How many units must be sold to break even?

Step 1: Identify the fixed costs of the business, which is $10,000.
Step 2: Identify the contribution margin per unit, which is $15.
Step 3: Use the break-even formula: Break-even point (units) = Fixed costs / Contribution margin per unit.
Step 4: Plug in the numbers: Break-even point (units) = $10,000 / $15.
Step 5: Calculate the result: $10,000 divided by $15 equals approximately 666.67.
Step 6: Since you can't sell a fraction of a unit, round up to the nearest whole number, which is 667 units.

Break-even Analysis – The process of determining the number of units that must be sold to cover fixed and variable costs.
Fixed Costs – Costs that do not change with the level of production or sales.
Contribution Margin – The amount each unit contributes to covering fixed costs after variable costs are deducted.