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PrecisionMakers Corp has total fixed costs of $25,000. The selling price per unit is $100, and the variable cost per unit is $60. Calculate the break-even point in dollars.

Question

PrecisionMakers Corp has total fixed costs of 25,000.Thesellingpriceperunitis25,000. The selling price per unit is 100, and the variable cost per unit is $60. Calculate the break-even point in dollars.

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Solution

To calculate the break-even point in dollars, we first need to find the contribution margin per unit, which is the selling price per unit minus the variable cost per unit.

Step 1: Calculate the contribution margin per unit = Selling price per unit - Variable cost per unit = 100100 - 60 = $40 per unit

Next, we calculate the break-even point in units, which is the total fixed costs divided by the contribution margin per unit.

Step 2: Calculate the break-even point in units = Total fixed costs / Contribution margin per unit = 25,000/25,000 / 40 = 625 units

Finally, to find the break-even point in dollars, we multiply the break-even point in units by the selling price per unit.

Step 3: Calculate the break-even point in dollars = Break-even point in units * Selling price per unit = 625 units * 100=100 = 62,500

So, PrecisionMakers Corp would need to make $62,500 in sales to cover their fixed and variable costs and start making a profit.

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