Question

"Larson's Ltd. sells its product for $12.00 per unit. The contribution margin per unit is $8.00 and fixed costs are $75,000. Larson has to sell to ______ units to break even.

A.18,750
B.9,375
C.3,750
D.6,250"

Answer 1

Larson's Ltd. needs to sell 9,375 units to break even. This is calculated using the break-even formula which divides the fixed costs by the contribution margin per unit.

Step-by-step explanation:

The student is asking about the break-even point for Larson's Ltd., which involves basic Business Mathematics knowledge. To calculate the number of units needed to break even, we use the formula:

Break-even units = Fixed costs / Contribution margin per unit

By applying the values given:

Break-even units = $75,000 / $8.00 per unit
= 9,375 units

So, Larson's Ltd. must sell 9,375 units to break even, which corresponds to answer choice B.