Question

Rice Company has a unit selling price of $650, variable costs per unit of $450, and fixed costs of $319,700. Compute the break-even point in units using (a) the mathematical equation and (b) unit contribution margin. (Round answers to 0 decimal places, e.g. 1,225.) (a) Mathematical Equation (b) Unit contribution margin Break-even point units units

Answer 1

Answer:

a) Using mathematical equation 1599 units

b) Using contribution margin 1598 units

Explanation:

Break even point in units in mathematical terms = $\frac{Fixed cost}{Selling price - Variable Cost}$

= $\frac{319,700}{650 - 450}$ = $\frac{319,700}{200}$ = 1599 units

b) Using contribution margin

Contribution = Selling Price - Variable Cost = $650 - $450 = $200

Contribution margin = ( $200/ $650 ) X 100 = 30.77%

BEP = $319,700 / 30.77% = $1,039,000.025

Number of units = $1,038,999.025/$650 = 1598 units

a) Using mathematical equation 1599 units

b) Using contribution margin 1598 units