Question

If a firm sells 40,000 units and the contribution margin on the firm's single product is $4.00 per unit and fixed costs are $60,000, what is the firm’s break even point in units?

Answer 1

Answer:

15000 units.

Explanation:

Given:

Number of units sold = 40,000

contribution margin per unit = $ 4.00

Total fixed cost = $ 60,000

now.

At the break even point, the contribution margin is equal to the fixed costs  for the product

mathematically,

( contribution margin per unit )  × ( Break even point) = Fixed costs

on substituting the respective values, we have

$ 4.00 × ( Break even point ) = $ 60,000

or

Break even point = $ 60,000 / $ 4.00

or

Break even point = 15000 units.