Question

ZZZ Best Company's fixed expenses total $180,000, its variable expense ratio is 25% and its variable expenses are $5 per unit. Based on this information, the break-even point in units is:

Answer 1

Break-even point in units = 12000 units

Step-by-step explanation:

Break-even point is where sales and expenses are the same, thus the sales of a company are enough to cover its expenses.

Break-even point in units= Fixed cost / ( price of product-variable costs)

Variable expense ratio = variable expense per unit/price per unit

25% = 5/ price per unit

0.25=5/price per unit

5/0.25 = price per unit

$20 =price per unit

Break-even point in units= Fixed cost / ( price of product-variable costs)

Break-even point in units = $180,000 / ($20-$5)

Break-even point in units = $180,000 / $15

Break-even point in units = 12000 units