Question

Dream Threads Company sells handminussewn shirts for $ 70 per shirt. It incurs monthly fixed costs of $ 8 comma 000. The contribution margin ratio is calculated to be 40​%. What is the breakeven point in​ units? (Round your answer up to the nearest whole​ unit.)

Answer 1

Breakeven in units 200 units of shirts

Step-by-step explanation:

Breakeven point is defined as the point where total revenue is equal to the expenses incurred. It is important to businesses because when they target production above this level they will make profit.

Breakeven in units= Fixed cost/ contributing margin

Contributing margin is the revenue minus the variable cost

Breakeven units= 8,000/40

Breakeven units= 200 units

So the business will have cost that will be equal to revenue at this point. If they want to make more profit they will produce more units.