Question

Mignon d'Armitage manufactures jewelry. This firm is planning to introduce a new necklace and is trying to determine how many units it must sell in order to break even. Fixed costs are $100,000 and variable costs for each unit will be $20. At the price of $45 each, the number of units that must be sold in order to break even is:

Answer 1

4,000 units

Step-by-step explanation:

The formula to compute the break even point is shown below:

= (Fixed costs ) ÷ (Contribution margin per unit)

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

And, the fixed cost is $100,000

Now put these values to the above formula

So, the value would be equal to

So, the break even point would be

= ($100,000) ÷ ($45 - $20)

= $100,000 ÷ $25

= 4,000 units