Question

You own a small manufacturing business that produces widgets. You have spent $150,000 acquiring the fixed assets you need to produce widgets. Each widget costs you $2 to make and they sell for $15 each, so your variable cost is 13.3% of the overall revenue. At your current level of operating leverage, how many widgets must you sell to break even

Answer 1

Answer:

11,538 units

Explanation:

Given that:

Fixed assets = $150,000

Variable cost = $2

Sales price = $15

Break even point = Fixed cost ÷ Contribution margin

Contribution margin = Sales per unit - Variable cost per unit = $15 - $2 = $13

Break even point (Sales) = $150,000 ÷ $13 = 11,538 units

Therefore, 11,538 widgets must be sold to break even.