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Company X has monthly fixed costs of $150,000 and a unit variable cost of $50. How many units do they have to sell at $100 to break even?

Question

Company X has monthly fixed costs of 150,000andaunitvariablecostof150,000 and a unit variable cost of 50. How many units do they have to sell at $100 to break even?

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Solution

To calculate the break-even point, we need to know how many units the company needs to sell to cover its fixed costs. This is done by dividing the fixed costs by the contribution margin per unit, which is the selling price per unit minus the variable cost per unit.

Here are the steps:

  1. Calculate the contribution margin per unit: Selling price per unit (100)−Variablecostperunit(100) - Variable cost per unit (50) = $50.

  2. Divide the fixed costs by the contribution margin per unit: 150,000/150,000 / 50 = 3,000 units.

So, Company X needs to sell 3,000 units at $100 each to break even.

This problem has been solved

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