If a company has a contribution margin of $30 per unit and fixed costs of $90,00

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Question: If a company has a contribution margin of $30 per unit and fixed costs of $90,000, how many units must be sold to break even?

Options:

Correct Answer: 3,000 units

Solution:

To calculate the break-even point in units, divide total fixed costs by the contribution margin per unit: $90,000 / $30 = 3,000 units.

If a company has a contribution margin of $30 per unit and fixed costs of $90,000, how many units must be sold to break even?

If a company has a contribution margin of $30 per unit and fixed costs of $90,000, how many units must be sold to break even?

Step 1: Identify the fixed costs. In this case, the fixed costs are $90,000.
Step 2: Identify the contribution margin per unit. Here, the contribution margin is $30 per unit.
Step 3: Use the formula to find the break-even point in units. The formula is: Break-even point (units) = Total Fixed Costs / Contribution Margin per Unit.
Step 4: Plug in the numbers: Break-even point (units) = $90,000 / $30.
Step 5: Calculate the result: $90,000 divided by $30 equals 3,000 units.
Step 6: Conclusion: The company must sell 3,000 units to break even.

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