Question

Given fixed costs of $30,000, variable costs of $2.00 per unit, and a contribution margin of $5.00 unit, __ units have to be sold in order to break even.

Answer 1

To break-even, the business must sell 6,000 units, calculated by dividing the fixed costs by the contribution margin per unit ($30,000 / $5.00).

Step-by-step explanation:

The student is asking about determining the break-even point in the context of a business's fixed and variable costs. The break-even point is the number of units that have to be sold to cover both fixed and variable costs, resulting in a net profit of zero. We're provided with fixed costs of $30,000, variable costs of $2.00 per unit, and a contribution margin of $5.00 per unit. To calculate the break-even point, we use the formula:

Break-Even Point (Units) = Fixed Costs / Contribution Margin Per Unit

In this case, the break-even point is:

Break-Even Point = $30,000 / $5.00 = 6,000 units

Therefore, 6,000 units must be sold to break-even.