Question

Larsen Films' is analyzing its cost structure. Its fixed operating costs are $470,000, its variable costs of $2.80 per unit produced, and its products sell for $4.00 per unit. What is the company's breakeven point, i.e., at what unit sales volume would income equal costs? a. 453,403 b. 411,250 c. 476,073 d. 391,667 e. 431,813

Answer 1

Answer:

d. 391,667

Explanation:

Contribution per unit = Selling price - Variable cost = $4 - $2.80 = $1.20

Break even point = Fixed cost ÷ Contribution per unit = $470,000 ÷ $1.20 = 391,667 units

Therefore, the company's breakeven point, i.e., the unit sales volume that would make income equal costs is 391,667 units.