Question

If a firm has a sales price per unit of $6.00, a variable cost per unit of $4.00, and a break-even point of 40,000 units, fixed costs are equal to​

Answer 1

$80,000

Step-by-step explanation:

From marginal analysis concepts, the break-even point is determined using the formula.

Break-even in units = fixed cost / contribution margin per unit

For this firm,

break -even = 40,000 units

Contribution margin per unit = selling price - variable costs

=$6 - $4 =$2

Therefore:

40,000 = fixed costs/ $2

Fixed costs = $40,000 x 2

Fixed costs = $80,000