If fixed costs are $50,000 and the contribution margin per unit is $20, what is the break-even quantity?

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Multiple Choice

If fixed costs are $50,000 and the contribution margin per unit is $20, what is the break-even quantity?

Explanation:
Understanding how to calculate the break-even point using fixed costs and unit contribution margin. The break-even quantity is found by dividing fixed costs by the contribution margin per unit. Here, fixed costs are 50,000 and each unit contributes 20 toward covering those costs, so 50,000 divided by 20 equals 2,500 units. At 2,500 units, the total contribution exactly matches fixed costs, yielding zero profit but no loss. Selling fewer than that doesn't cover all fixed costs, while selling more than that produces a profit.

Understanding how to calculate the break-even point using fixed costs and unit contribution margin. The break-even quantity is found by dividing fixed costs by the contribution margin per unit. Here, fixed costs are 50,000 and each unit contributes 20 toward covering those costs, so 50,000 divided by 20 equals 2,500 units. At 2,500 units, the total contribution exactly matches fixed costs, yielding zero profit but no loss. Selling fewer than that doesn't cover all fixed costs, while selling more than that produces a profit.

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