Final answer:
The correct formula to calculate break-even units is Fixed Costs divided by Unit Contribution Margin. This calculation helps a business determine the number of units it needs to sell to cover all fixed costs and reach a point where no profit or loss is made.
Step-by-step explanation:
The formula used to calculate break-even units in business is Fixed Costs ÷ Unit Contribution Margin. To arrive at the break-even point, you need to cover all the fixed costs through the sales of the product. The Unit Contribution Margin is calculated by subtracting the Average Variable Cost from the selling price per unit. Once the fixed costs are covered, the company does not make a profit or loss, which is essentially the break-even scenario.
Marginal costs, which are calculated by taking the change in total cost divided by the change in output, are important for understanding the incremental cost of producing one additional unit. However, it is separate from the break-even calculation and is used for analyzing the profitability of additional units sold beyond the break-even point.The formula used to calculate break-even units is Fixed Costs ÷ Unit Contribution Margin. This formula helps determine the number of units a company needs to sell in order to cover all of its costs and break even. Let's say the fixed costs for a company are $10,000 and the unit contribution margin is $5. By dividing the fixed costs by the unit contribution margin, we find that the break-even units would be 2,000 units ($10,000 ÷ $5 = 2,000 units).