Question

Your uncle is considering investing in a new company that will produce high quality stereo speakers. The sales price would be set at 1.70 times the variable cost per unit; the variable cost per unit is estimated to be $75.00; and fixed costs are estimated at $1,170,000. What sales volume would be required to break even, i.e., to have EBIT = zero? 23,400 25,851 18,051 17,160 22,286

Answer 1

Break-even point (BEP)= 22,286 units

Step-by-step explanation:

Breakeven point (BEP) is the level of activity that equates the total cost to the total revenue. At the break-even point the business makes no profit and no loss.

Break-even point = Total fixed cost for the period /( selling price - unit variable cost)

Variable cost= 75

Selling price= 1.70 times × 75 = $127.5

BEP = 1,170,000/(127.5-75)

= 22,285.71 units

BEP =22,286 units