Question

if a firm has fixed costs of $85,000, a variable cost per unit of $10 and sales price per unit of $15, what is the firm’s breakeven point in units?

Answer 1

The breakeven point is found by dividing the fixed costs by the sale price per unit minus the variable cost per unit, resulting in the firm needing to sell 17,000 units to break even.

Step-by-step explanation:

The breakeven point in units for a firm with fixed costs, variable costs per unit, and a sale price per unit is calculated by dividing the total fixed costs by the contribution margin per unit, where the contribution margin is the sale price per unit minus the variable cost per unit.

For a firm with fixed costs of $85,000, a variable cost per unit of $10, and a sale price per unit of $15, the contribution margin per unit is $15 - $10 = $5. The breakeven point is thus $85,000 divided by $5, or 17,000 units.