Question

The following data pertain to last month's operations: Selling price Variable production cost $30 per unit $15 per unit Fixed production cost Variable selling & admin. expense $80,000 $3 per unit Fixed selling & admin. expenses $40,000 The break-even point in dollars is: A. $160,000. B. $200,000. C. $240,000. D. $300,000.

Answer 1

The break-even point in dollars is calculated by dividing the total fixed costs by the contribution margin per unit and then multiplying by the selling price per unit. The break-even point for the given data is $240,000.

Step-by-step explanation:

To calculate the break-even point in dollars, you need to consider fixed and variable costs, and the selling price per unit. The break-even point is when total revenue equals total costs. As given, the selling price is $30 per unit, and the variable production cost is $15 per unit. Thus, the contribution margin per unit is the selling price minus the variable production cost, which is $30 - $15 = $15 per unit.

Fixed production costs are $80,000, and fixed selling & admin expenses are $40,000, adding up to $120,000 in total fixed costs. To find the break-even point in dollars, you divide the total fixed costs by the contribution margin per unit: $120,000 / $15 per unit = 8,000 units. Now, multiply the number of units by the selling price per unit to get the break-even in dollars: 8,000 units x $30 = $240,000.