Question

Umbridge Purses Unlimited sells purses with a sales price of $35 each. Each purse costs the company $20 to produce, and the store incurs a total of $300,000 in fixed costs each year. What is the yearly breakeven point in units?
a. 8,572 purses
b. 10,000 purses
c. 15,000 purses
d. 20,000 purses
e. None of the above

Answer 1

Answer:

Break-even point in units= 20,000 units

Explanation:

Giving the following information:

Selling price= $35

Unitary variable cost= $20 t

Total fixed cost= $300,000

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 300,000/ (35 - 20)

Break-even point in units= 20,000 units