Question

Diva Products produces scarves. The estimated fixed costs for the year are $164,500, and the estimated variable costs per unit are $9. The company expects to produce and sell 40,000 scarves at a unit selling price of $16 per unit. How much is the break-even point in units?

Answer 1

The answer is 23,500 units

Step-by-step explanation:

Break-even point is the point at which the business is neither making profit or loss. The point at which total revenue equals total cost.

The formula for breakfast even point is Fixed cost ÷ contribution margin.

Where contribution per margin is selling price minus variable cost.

Contribution margin is now:

$16 - $9

$7 per unit.

Therefore, break-even point is

$164,500 ÷ $7

23,500 units