Question

A company with fixed costs of $10,000 per month has a target price of $165 for their sole product, a heat shield for masonry fireplaces. What level of output represents their break-even point if their variable cost for producing is $35 per unit?a.between 60 and 70 unitsb.between 70 and 80 unitsc.between 80 and 90 unitsd.between 90 and 100 units

Answer 1

Answer:

b. between 70 and 80 units

Explanation:

In this question we have to compute the break even point in units which is shown below:

Break even point in units = (Fixed cost ) ÷ (Contribution margin per unit)  

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit  

So, the units would be equal to

= ($10,000) ÷ ($165 - $35)

= $10,000 ÷ $130

= 76.92 units