Question

Exercise 3-6A (Algo) Cost structure, risk, and the break-even point LO 3-2Adams Company produces a product that sells for $33 per unit and has a variable cost of $13 per unit. Adams incurs annual fixed costs of $120,000. RequiredDetermine the sales volume in units and dollars required to break even. (Do not round intermediate calculations.)Calculate the break-even point assuming fixed costs increase to $192,000. (Do not round intermediate calculations.)

Answer 1

9,600 units

$316,800

Step-by-step explanation:

The computation of break-even point is shown below:-

Contribution per unit = Selling price per unit - Variable price per unit

= $33 - $13

= $20

Break-even in units = Fixed cost ÷ Contribution per unit

= $192,000 ÷ $20

= 9,600 units

Break even sales in dollars = Break-even in units × selling price per unit

= $9,600 × $33

= $316,800

So, for computing the break even in units and dollars we simply applied the above formula.