Question

Assume that at one point a business sells organizers for a price of $20 each, which cost $10 to produce (variable costs). The business's fixed expenses for the period are $4,000. What is the break-even point?

300 units
200 units
100 units
400 units

Answer 1

400 units

Step-by-step explanation:

From the contribution margin concept, the break-even point is obtained by dividing the fixed costs by the contribution margin per unit.

For this business, fixed costs are $4,000

Contribution margin per unit is equal to sales price - variable cost per unit

=$20 - $10

= $10

Break-even point = $4000/$10

=400 units