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?
Practice Questions
1 question
Q1
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?
3,000 units
2,000 units
1,500 units
4,000 units
To calculate the break-even point in units, divide total fixed costs by the contribution margin per unit: $90,000 / $30 = 3,000 units.
Questions & Step-by-step Solutions
1 item
Q
Q: 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?
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.
Steps: 6
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.
