Question

If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24, the break-even sales (units) if the variable costs are decreased by $2 is:__________ a. 1,950 units b. 2,340 units c. 1,114 units d. 2,127 units

Answer 1

Answer: b. 2,340 units

Explanation:

Break-even sales refers to the amount of sales that would give the company $0 profits.

It can be calculated by the formula;

= Fixed Costs / Contribution Margin

Contribution Margin = Sales - Variable costs

= 42 - (24 - 2)

= $20

Breakeven = 46,800/20

= 2,340 units