Question

Mishoe Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (1,000 units) $ 50,000 Variable expenses 32,500 Contribution margin 17,500 Fixed expenses 12,250 Net operating income $ 5,250 The break-even point in unit sales is closest to:

Answer 1

Answer:

The break-even point in unit sales is closest to 700 units

Explanation:

Break-even point is the level of sale at which business incur No Profit No loss.  At this point the business cover all the variable and fixed costs and no profit is earned yet. The contribution earned over this point is the actual profit for the business.

Price per unit = $50,000 / 1,000 = $50 per unit

Variable cost per unit = $32,500 / 1,000 = $32.5 per unit

Contribution Margin per unit = $17,500 / 1,000 = $17.5 per unit

Break-even point is Calculated as follow:

Break-even Point = Fixed Cost / Contribution margin per unit

Break-even Point = $12,250 / $17.5

Break-even Point = 700 units