Question

A Corporation sells a single product for $20 per unit. Last year, the company's sales revenue was $300,000 and its net operating income was $24,000. If fixed expenses totaled $96,000 for the year, the break-even point in unit sales was: A) 12,000 units B) 9,900 units C) 15,000 units D) 14,100 units

Answer 1

Answer:

A) 12,000 units

Explanation:

For computing the break even point in units sales first determine the variable cost which is shown below:

= Sales revenue - fixed expenses - net operating income

= $300,000 - $96,000 - $24,000

= $180,000

And, the variable cost per unit is

= $180,000 ÷ ($300,000 ÷ $20)

= $12

Now the break even point is

= Fixed cost ÷ Contribution margin per unit

= $96,000 ÷ ($20 - $12)

= 12,000 units