Question

im Marlow, the owner of The Clock Works, wanted to know how many clocks he must sell in order to cover his fixed cost at a given price. Tim knew that he had a fixed cost of $20,000 for equipment, taxes, and a bank loan. He also had a unit variable cost of $20 per clock for labor, materials, and promotional costs. If the price Tim charges for each of his clocks is $40, what is his break-even point quantity? Group of answer choices

Answer 1

Answer:

Break even point will be 2000

Explanation:

We have given fixed cost = $20000

Variable cost = $20 per clock

And Tim charges $40 for each clock

So sales cost = $40

So contribution margin per units = $40 - $20 = $20

We have to find the break even point

Break even point is given by

Break even point =\frac{fixed\ cost}{contribution\ margin\ per\ unit}=\frac{$20000}{$20}=2000