Break-even point in units given fixed costs 5,000, price 25, variable cost 15 is which value?

Prepare for the PHFO Quantitative Analysis For Business Exam. Study with flashcards, multiple choice questions, hints, and explanations to ensure confidence and success in your exam!

Multiple Choice

Break-even point in units given fixed costs 5,000, price 25, variable cost 15 is which value?

Explanation:
Break-even point in units is reached when the total contribution from sales just covers fixed costs. Each unit adds contribution equal to price minus variable cost. Here that contribution is 25 − 15 = 10 per unit. With fixed costs of 5,000, the units needed to break even are 5,000 ÷ 10 = 500 units. At 500 units, revenue is 12,500 and variable costs are 7,500, leaving 5,000 to cover fixed costs and zero profit. Selling more than 500 units yields profit, while fewer yields a loss. So the break-even point is 500 units.

Break-even point in units is reached when the total contribution from sales just covers fixed costs. Each unit adds contribution equal to price minus variable cost. Here that contribution is 25 − 15 = 10 per unit. With fixed costs of 5,000, the units needed to break even are 5,000 ÷ 10 = 500 units. At 500 units, revenue is 12,500 and variable costs are 7,500, leaving 5,000 to cover fixed costs and zero profit. Selling more than 500 units yields profit, while fewer yields a loss. So the break-even point is 500 units.

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