Question

Sandhill Cash, Ltd. operates a chain of exclusive ski hat boutiques in the western United States. The stores purchase several hat styles from a single distributor at $10 each. All other costs incurred by the company are fixed. Sandhill Cash, Ltd. sells the hats for $40 each.

Required:
If fixed costs total $130,000 per year, what is the breakeven point in units

Answer 1

Answer:

the break even point in units is 4,333 units

Explanation:

The computation of the break even point in units is shown below:

= Fixed cost ÷ contribution margin per unit

= $130,000 ÷ ($40 - $10)

= $130,000 ÷ $30

= 4,333 units

hence, the break even point in units is 4,333 units

the above formula should be applied for the same