Answer:
The correct answer is 1,300 units.
Step-by-step explanation:
According to the scenario, the given data are as follows:
Estimated depreciation = $32,000
Fixed cost = $36,000
Total sales = $73,460
Variable cost per unit = $4.20
Let break even level of production = K
than selling price = $73,460 ÷ K
So, we can calculate the break even level of production by using following formula:
Break even level of production = (Fixed cost + Depreciation) ÷ Contribution per unit
Where, contribution margin = Selling price - variable price
= ($73,460 ÷ K) - $4.20
By putting the value, we get
K = ( $36,000 + $32,000) ÷ [ ($73,460 ÷ K) - $4.20]
K × ($73,460 ÷ K - $4.2) = $68,000
$73,460 - $4.2 K = $68,000
K = ($73,460 - $68, 000) ÷ $4.2
K = $5,460 ÷ $4.2
= 1,300 units.