Question

Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the company has fixed costs that amount to $400,000. Current sales total 16,000 units. Narchie: will break-even by selling 13,333 units. will break-even by selling 8,000 units. will break-even by selling 20,000 units. cannot break-even because it loses money on every unit sold. will break-even by selling 1,000,000 units.

Answer 1

The break even units is 20,000 units

Explanation:

Firstly, the break even units needds to be calculated and is as follows:

Selling price per unit = $50.00

variable costs = $30.00

Contribution Margin per unit = $20.00

BEP units = Fixed cost by contribution margin per unit

Fixed overhead = $400000

Contribution margin = $20

BEP = 20000 units

where : BEP = Break even units

Therefore, the break even units will be at 20000 units.

As per the given options in the question, the option C is the correct option.