Question

You own a small manufacturing business that produces widgets. You have spent $600,000 acquiring the fixed assets you need to produce widgets. Each widget costs you $20 to make and they sell for $65 each, so your variable cost is 30.8% of the overall revenue. At your current level of operating leverage, how many widgets must you sell to break even

Answer 1

Answer:

BEP Sales = 13,333 Units (Approx)

Explanation:

Given:

Fixed assets = $600,000

Variable cost = $20

Sales price = $65

Find:

BEP Sales

Computation:

BEP Sales = Fixed Cost / (Sale - VC)

BEP Sales = $600,000 / ($65 - $20)

BEP Sales = $600,000 / $45

BEP Sales = 13,333 Units (Approx)