Question

Company b is analyzing its cost structure. its fixed operating costs are $470,000, its variable costs are $2.80 per unit produced, and its products sell for $4.00 per unit. what is the company's breakeven point, i.e., at what unit sales volume would income equal costs?

a. 167,857
b. 391,667
c. 141,000
d. 117,500
e. 69,118

Answer 1

Company B's breakeven point is when they sell 391,667 units, calculated by dividing the fixed costs by the difference between the selling price per unit and the variable cost per unit. Therefore, the correct option is B.

Step-by-step explanation:

The breakeven point for Company B is calculated by dividing the fixed operating costs by the difference between the selling price per unit and the variable cost per unit. Using the formula:

Breakeven Point (units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

we get:

Breakeven Point (units) = $470,000 / ($4.00 - $2.80) = $470,000 / $1.20 = 391,666.67

Therefore, Company B's breakeven point is when they sell 391,667 units (since you can't sell a fraction of a unit).