Question

Stone Corporation is a manufacturing company that makes small electric motors it sells for $45 per unit. The variable costs of production are $25 per motor, and annual fixed costs of production are $800,000. How many units of product must Stone make and sell to break even?

Answer 1

Answer:

40,000 units

Explanation:

Given that,

Selling price per unit = $45 per unit

Variable cost per unit = $25

Fixed cost = $800,000

Contribution margin per unit:

= Selling price per unit - variable cost per unit

= $45 - $25

= $20

Break - Even units:

= Fixed cost ÷ Contribution margin per unit

= $800,000 ÷ $20

= 40,000 units

Therefore, the Break - Even sales in units are 40,000.