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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? ___________________________________

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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.

jeff jeffy answered 2 years ago
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