Question

A maker of computer games expects to sell 475,000 games at a price of $48 per game. These units cost $10 to produce. Selling, general, and administrative expenses are $1.0 million and depreciation is $280,000. What is the EBIT break-even point for the number of games sold in this case

Answer 1

The answer is $33, 684

Step-by-step explanation:

The formula for calculating EBIT break point is (Units Sold × Sale Price) - (Units Sold × Cost per unit) - SG&A - Depreciation

Going by the information given in the question, the EBIT break point is $33, 684

Answer 2

Answer: The correct answer is $33,684

Explanation: Break evn point is the point where both the revenue generated from sales and the expenses incurred are equal. It is a point where neither gain or loss is made.

In calcualting EBIT breakeven poimt for the number of games sold,

(SG&A + depreciation expense)/ sales per unit - cost per unit

= (1000000 + 280000)/ 48 - 10

= 1280000/ 38

= $33,684