Question

Kayla wants to know how many units she must sell to cover all of her costs. She indicates to you that her selling price is $25 per unit, her fixed costs are $7,000, and the variable costs per unit are $15. What is her break-even point?

Answer 1

Answer:

Break-even point in units= 700 units

Explanation:

Giving the following information:

She indicates to you that her selling price is $25 per unit, her fixed costs are $7,000, and the variable costs per unit are $15.

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 7,000/ (25 - 15)

Break-even point in units= 700 units

Answer 2

Answer:

700 units

Explanation:

Breakeven is the point where no profit/loss is made by an entity as

total sales = total expense

where the total expense is the sum of the fixed and variable expense.

The total sales and total variable cost are dependent on the level of activity.

Let the breakeven point in units be y

then,

(25 - 15)y - 7000 = 0

10y = 7000

y = 700 units