Question

A company sells headphones for $45 per unit. If fixed costs total $162,000, and variable costs are $18 per unit, what is the company's break-even point in units?

Answer 1

The company needs to sell 6,000 units of headphones to break even, calculated by dividing the fixed costs by the difference between the selling price per unit and the variable cost per unit.

Step-by-step explanation:

The question involves calculating the break-even point for a company selling headphones. The break-even point is the number of units that the company needs to sell in order to cover all of its costs, both fixed and variable. To find the break-even point in units, we use the formula: Break-even point (units) = Fixed Costs / (Selling Price per unit - Variable Cost per unit).

So, the calculation for the break-even point would be:

Break-even point = $162,000 / ($45 - $18) = $162,000 / $27 = 6,000 units.

Therefore, the company needs to sell 6,000 units of headphones to break even.