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 100, and the variable cost per unit is $60. Calculate the break-even point in dollars.
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 = 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 = 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 * 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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