Question

expanse company is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $50; and total fixed costs of $150,000. calculate the break-even point in units and in dollar sales.

Answer 1

To calculate the break-even point in units and in dollar sales, divide the total fixed costs by the unit contribution margin. The break-even point in units is 2,000 units and the break-even point in dollar sales is $250,000.

Step-by-step explanation:

To calculate the break-even point in units and in dollar sales, we need to find the quantity of units at which the company's total revenue equals its total costs. The break-even point in units can be calculated by dividing the total fixed costs by the unit contribution margin. In this case, the unit contribution margin is the unit sales price minus the unit variable costs. The break-even point in dollar sales can be calculated by multiplying the break-even point in units by the unit sales price.

Step 1: Calculate the unit contribution margin: $125 - $50 = $75
Step 2: Calculate the break-even point in units: $150,000 / $75 = 2,000 units
Step 3: Calculate the break-even point in dollar sales: 2,000 units * $125 = $250,000