Question

A company has total fixed costs of $360,000. Its product sells for $40 per unit and variable costs amount to $25 per unit. What is the break-even point in dollar sales?

Answer 1

Break Even = Fixed costs /Contribution per unit.

First work out your contribution.

Contribution = Price per unit - V.Cost per unit.
£40 - £25 = £15

Fixed Costs = £360,000

£360,000 / 15 = 24,000 units.

Since you want the break even in sales you need to multiply the units by the selling price.

24,000 x 40 = £960,000.

Hope this helps!