Question

Pierce Company's break-even point is 11,000 units. Its product sells for $26 and has a $11 variable cost per unit. What is the company's total fixed cost amount?

Answer 1

Answer:

The company's total fixed cost amount is $165,000

Explanation:

Break-even point is the level of sales at which the business has no profit no loss position. Business has cover it all the variable and fixed costs at this point  after this point contribution made by each unit will be a profit.

Contribution margin per unit = Price per unit - Variable cost per unit = $26 - $11 = $15

Break-even Point = Fixed cost / Contribution margin per unit

11,000 units = Fixed cost / $15

Fixed Cost = 11,000 units x $15 = $165,000