VIPSolutionsOPeration Management A company sells a product for $ 5 0 per unit. The variable cost per unit is $ 3 0 , and the fixed costs are $ 4 0 , 0 0 0 . What is the break - even point in units? Options: A ) 1 , 0 0 0 units B ) 1 , 5 0 0 units C ) 2 , 0 0 0 units D ) 2 , 5 0 0 units explain the answer and give final summary
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OPeration Management A company sells a product for $ 5 0 per unit. The variable cost per unit is $ 3 0 , and the fixed costs are $ 4 0 , 0 0 0 . What is the break - even point in units? Options: A ) 1 , 0 0 0 units B ) 1 , 5 0 0 units C ) 2 , 0 0 0 units D ) 2 , 5 0 0 units explain the answer and give final summary
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Asked by: sreegeeth
Created at: 2025-09-16 00:35:12
Asked by: sreegeeth
Created at: 2025-09-16 00:35:12
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# Break-Even Point Calculation
A company has:
- **Selling price per unit**: $50
- **Variable cost per unit**: $30
- **Fixed costs**: $40,000
## Step 1: Find Contribution Margin
\[
\text{Contribution margin per unit} = \text{Selling price per unit} - \text{Variable cost per unit}
\]
\[
= \$50 - \$30 = \$20
\]
## Step 2: Calculate Break-Even Point (Units)
\[
\text{Break-even point (units)} = \frac{\text{Fixed Costs}}{\text{Contribution Margin per unit}}
\]
\[
= \frac{\$40,000}{\$20} = 2,000 \text{ units}
\]
## Step 3: Match to Options
- A) 1,000 units
- B) 1,500 units
- C) 2,000 units
- D) 2,500 units
**Correct answer: C) 2,000 units**
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## Summary
The break-even point is where total revenue equals total costs (no profit or loss). For this company, the break-even point is **2,000 units**, meaning they need to sell 2,000 units to cover all costs.
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