Question

asley Cash, Ltd. operates a chain of exclusive ski hat boutiques in the western United States. The stores purchase several hat styles from a single distributor at $12 each. All other costs incurred by the company are fixed. Lasley Cash, Ltd. sells the hats for $25 each. If fixed costs total $130,000 per year, what is the breakeven point in units

Answer 1

Answer:

The break even point in units is 10000 units per year.

Explanation:

The break even point in units is the number of units that must be sold in order for the company to earn enough revenue to cover its total costs. It is a point where total revenue equals total cost and there is no profit and no loss. The break even point in units is calculated as follows,

Break even in units = Fixed costs / Contribution margin per unit

Where,

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

Contribution margin per unit = 25 - 12 = $13 per unit

Break even in units = 130000 / 13     = 10000 units

Answer 2

Answer:

10,000 units

Explanation:

The break even point is the number of units a company must sell for its total revenue generated to be equal to the total cost incurred.

Breakeven is the point where no profit/loss is made by an entity as

total sales = total expense

where the total expense is the sum of the fixed and variable expense.

The total sales and total variable cost are dependent on the level of activity.

let the breakeven point in units be t

25t - 12t = 130,000

13t = 130,000

t = 10,000 units