Question

Moyas Corporation sells a single product for $20 per unit. Last year, the company's sales revenue was $300,000 and its net operating income was $16,000. If fixed expenses totaled $104,000 for the year, the break-even point in unit sales was:

Multiple Choice

9,000 units

13,000 units

15,000 units

15,800 units

Answer 1

Solution:

Break Even Poin in Unit Sales = Total Fixed Expenses / Contribution Margin Per Unit

To calculate Contribution Margin Per Unit, we need to calculate first the total contribution margin and then the Total Sold Units.

Contribution Margin = Net Operating INcome + Fixed Expenses = $104,000 + $16,000 = $120,000

Total Units Sold = Sales Revenue / Unit Selling PRice = $300,000 / 20 = 15,000 Units

So, the Contribution Margin Per Unit = Total COntribution Margin / Unit Sold = $120,000 / 15,000 Units = $8 per unit

So,

Break Even Poin in Unit Sales = Total Fixed Expenses $104,000 / Contribution Margin Per Unit $8 = 13,000 Units

Hence, the correct option is 13,000 Units

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