Question

If a firm has fixed costs of 85,000.00, a variable cost per unit of 10.00 and sales price per unit of 15.00, what is the firms break even point in units?

Answer 1

17,000 units

Step-by-step explanation:

Applying the contribution margin formula

Break even = Fixed cost/ contribution margin per unit

Calculating contribution margin per unit

CM = selling price - variable costs

In this case : selling price= $15

Variable cost= $ 10

CM = $15 - $10 = $5

BE = $85,000/ $5

=17,000 units