Question

The variable cost to produce a widget is $64, with fixed costs of $1,400. If you sell the widgets for $120 per piece, the break-even point is

Answer 1

Answer:

The break even point is 25 units.

Explanation:

The break even point is where you have no gain, because the amount of sales in dollars is enoguh to cover your fixed costs. It is calculated

$\frac{Fixed.costs}{Contribution.margin}$

where the contribution margin (or CM) is the difference between price and variable cost. So, the CM in this case is 120 - 64 = 56.

Finally, the break even point is $\frac{1,400}{56} = 25$