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Assume a fixed cost for a process of $120,000. The variable cost to produce each unit of product is $35, and the selling price for the finished product is $50. Which of the following is the number of units that has to be produced and sold to break even?
a. 790 units
b. 1,000 units
c. 500 units
d. 900 units
e. 667 units

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Answer:

8000 units

Explanation:

Given the following :

Fixed cost = $120,000

Variable cost per unit of product = $35

Selling price per unit of product = $50

Number of units that has to be sold to break even:

Break even point (unit) is the ratio of the fixed cost and the unit contribution margin of a product.

Unit contribution margin = selling price - variable cost

Unit contribution margin = $50 - $35 = $15

Break-even point (unit) = $120,000 / $15

Break-even point (unit) = 8000 units

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