Question

a company manufactures a product and sells it for $120 per unit. the total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. what is the company's break-even point in (a) units and(b) dollar sales?

Answer 1

The company's break-even point is 3,450 units and $414,000 in dollar sales. This is calculated by dividing the total fixed costs by the contribution margin per unit and then multiplying the resulting break-even units by the selling price per unit.

Step-by-step explanation:

To determine the company's break-even point in units, we first calculate the contribution margin per unit, which is the difference between the selling price per unit and the variable cost per unit. In this case, the contribution margin per unit is $120 - $75 = $45 per unit. The break-even point in units is then found by dividing the total fixed costs by the contribution margin per unit. Therefore, the company's break-even point in units is $155,250 ÷ $45 = 3,450 units.

To find the break-even point in dollar sales, we multiply the break-even point in units by the selling price per unit. Hence, the break-even point in dollar sales is 3,450 units × $120 = $414,000. This means the company needs to generate $414,000 in sales to cover all its fixed and variable costs.