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The Armour Company had the following revenue and costs in the most recently completed fiscal year:  Total revenue $ 11,000,000  Total fixed costs $ 4,000,000  Total variable costs $ 8,000,000  Total units produced and sold   1,000,000  a. What is the unit sales volume at the break-even point? (Round your answer to the nearest whole number.)Break-even point            units

Question

The Armour Company had the following revenue and costs in the most recently completed fiscal year:  Total revenue 11,000,000 Totalfixedcosts 11,000,000  Total fixed costs 4,000,000  Total variable costs $ 8,000,000  Total units produced and sold   1,000,000  a. What is the unit sales volume at the break-even point? (Round your answer to the nearest whole number.)Break-even point            units

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Solution

To calculate the break-even point in units, we need to know the fixed costs, variable costs per unit, and the selling price per unit.

From the information given, we can calculate the variable cost per unit and the selling price per unit as follows:

Variable cost per unit = Total variable costs / Total units produced and sold = 8,000,000/1,000,000=8,000,000 / 1,000,000 = 8

Selling price per unit = Total revenue / Total units produced and sold = 11,000,000/1,000,000=11,000,000 / 1,000,000 = 11

Now, we can calculate the break-even point using the formula:

Break-even point in units = Total fixed costs / (Selling price per unit - Variable cost per unit) = 4,000,000/(4,000,000 / (11 - 8)=8) = 4,000,000 / $3 = 1,333,333.33 units

Rounding to the nearest whole number, the break-even point is 1,333,333 units.

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