Question

Verde, Inc. has fixed costs of $3,120,000 and the unit contribution margin is 60% of the $325 unit selling price. What is Verde's break-even point?

a. 9,600 units
b. 16,000 units
c. 24,000 units
d. 6,000 units

Answer 1

The break-even point for Verde, Inc. is calculated by dividing the total fixed costs of $3,120,000 by the unit contribution margin of $195, resulting in a break-even point of 16,000 units. Option b. is correct.

Step-by-step explanation:

To calculate Verde, Inc.'s break-even point in units, we need to divide the total fixed costs by the unit contribution margin. The unit contribution margin is 60% of the $325 unit selling price, which means it is $325 x 0.60 = $195. Therefore, we can calculate the break-even point as follows:

Break-even point in units = Total Fixed Costs / Unit Contribution Margin

Break-even point in units = $3,120,000 / $195

Break-even point in units = 16,000 units

Hence, Verde, Inc. needs to sell 16,000 units to break even.