Question

Alvarez Company's break-even point in units is 1,000. The sales price per unit is $10 and variable cost per unit is $7. If the company sells 2,500 units, what will net income be?

Answer 1

Answer:

Net Revenue = $4,500

Explanation:

Break Even point in units = $\frac{Fixed \:cost}{Contribution \: Per \: Unit}$

Here, provided

Break even point = 1,000 units

Contribution = Selling price - Variable Cost = $10 - $7 = $3

Putting these values in above,

We have,

$1,000 = \frac{Fixed \: Cost}{3.00}$

$3 \times 1,000$ = Fixed cost = $3,000

now when we sell 2,500 units we have

Revenue = 2,500 $\times$ $10 = $25,000

Variable Cost = $7 $\times$ 2,500 = $17,500

Fixed cost = $3,000

Net Revenue = $25,000 - $17,500 - $3,000 = $4,500