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Bezzdna [24]
3 years ago
14

Break Even Analysis 1. A USB thumb drive production line will have $240,000 fixed costs variable costs per unit of $1.97. Each u

nit sells for $4.97. How many units must be sold to break even? 80,000 If demand is forecast at 120,000 units, should you operate the production line? Explain your decision.
Business
1 answer:
melomori [17]3 years ago
3 0

Answer:

Instructions are below.

Explanation:

Giving the following information:

Fixed costs= $240,000

Unitary variable cost= $1.97

Selling price per unit= $4.97.

First, we need to calculate the break-even point in units:

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

Break-even point in units= 240,000 / (4.97 - 1.97)

Break-even point in units= 80,000 units

<u>The break-even point analysis provides information regarding the number of units to be sold to cover for the fixed and variable costs.</u>

If the forecasted sales are 120,000, this means that the company will cover costs and make a profit. The margin of safety is 40,000 units.

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So why does a company hire a person?

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