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Fill in the Blank QuestionFill in the blank question.RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. How many units must be produced to break-even ?

Question

Fill in the Blank QuestionFill in the blank question.RST Company produces a product that has a variable cost of 6perunit.Thecompanysfixedcostsare6 per unit. The company's fixed costs are 30,000. The product sells for $10 per unit. How many units must be produced to break-even ?

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Solution

To calculate the break-even point in units, we need to divide the fixed costs by the contribution margin per unit. The contribution margin per unit is calculated by subtracting the variable cost per unit from the selling price per unit.

Here are the steps:

  1. Calculate the contribution margin per unit: Selling price per unit - Variable cost per unit = 1010 - 6 = $4 per unit.

  2. Calculate the break-even point in units: Fixed costs / Contribution margin per unit = 30,000/30,000 / 4 = 7,500 units.

So, RST Company must produce and sell 7,500 units to break-even.

This problem has been solved

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