Question

Cornwell Company, a producer of electronic components, has the following information: Income tax rate 30% Selling price per unit $8.00 Variable cost per unit $3.00 Total fixed costs $120,000.00 The break-even point in dollars is ________.

Answer 1

To find the break-even point in dollars for Cornwell Company, you first calculate the contribution margin per unit ($8.00 - $3.00), then divide the total fixed costs by this margin, and multiply the result by the selling price per unit. The break-even point in dollars is $192,000.00.

Step-by-step explanation:

To calculate the break-even point, we use the formula where the break-even in units is the total fixed costs divided by the contribution margin per unit, and then this result is multiplied by the selling price per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit.

Firstly, we find the contribution margin per unit:

• Selling price per unit: $8.00
• Variable cost per unit: $3.00
• Contribution margin per unit: $8.00 - $3.00 = $5.00

Now, we find the break-even point in units:

• Total fixed costs: $120,000.00
• Break-even point in units = $120,000.00 / $5.00
• Break-even point in units = 24,000 units

Finally, we calculate the break-even point in dollars:

• Break-even point in dollars = Break-even point in units × Selling price per unit
• Break-even point in dollars = 24,000 units × $8.00
• Break-even point in dollars = $192,000.00

The break-even point in dollars for Cornwell Company is $192,000.00.