Question

Mandela Manufacturing produces a single product that sells for $140. Variable costs per unit equal $28. The company expects total fixed costs to be $56,000 for the next month at the projected sales level of 1200 units.

What is the Break-Even Point in Units?

Answer 1

To find the Break-Even Point in Units for Mandela Manufacturing, divide the total fixed costs ($56,000) by the contribution margin per unit ($112), resulting in 500 units needed to break even.

Step-by-step explanation:

To calculate the Break-Even Point in Units for Mandela Manufacturing, we use the following formula:

1. Calculate the contribution margin per unit, which is the selling price per unit minus the variable cost per unit. In this case, the contribution margin per unit is $140 - $28 = $112.
2. Determine the total fixed costs, which are given as $56,000.
3. Divide the total fixed costs by the contribution margin per unit to find the break-even point in units. Thus, the break-even point in units is $56,000 / $112 = 500 units.

Therefore, Mandela Manufacturing must sell 500 units to cover all its costs and break even.