Question
In: Finance
If the unit sales price is $12, the unit variable cost is $7.00 and fixed costs...
If the unit sales price is $12, the unit variable cost is $7.00 and fixed costs are $125,000; what is the,
break-even quantity in # of units? ___________________________________
Please Show steps
Solutions
Expert Solution
| Solution: | ||||
| Break-even quantity in units | 25,000 | units | ||
| Working Notes: | ||||
| Contribution margin per unit = Selling price per unit - Variable cost per unit | ||||
| Contribution margin per unit = $12 - $7 | ||||
| Contribution margin per unit = $5 | ||||
| Break-even quantity in units = Total fixed costs / Contribution margin per unit | ||||
| Break-even quantity in units = $125,000 /$5 | ||||
| Break-even quantity in units = 25,000 units | ||||
| Break even quantity in units, is the quantity at which company is at no profit no loss status, means both fixed cost and variable cost are recovered . | ||||
| Revenue | 300000 | |||
| [25,000 x 12 ] | ||||
| Less: Variable cost | 175000 | |||
| [25,000 x 7 ] | ||||
| Contribution margin | 125000 | |||
| Less: Fixed cost | 125,000 | |||
| Net income | 0 | |||
| Please feel free to ask if anything about above solution in comment section of the question. | ||||
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Total
Per Unit
Sales (36,000
units)
$
252,000
$
7.00
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4.00
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$
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Variable Cost
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Contribution Margin
per unit
X
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$468
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Y
473
253
220
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Variable Cost
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Contribution Margin
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