Question

The variable cost to produce a widget is $64, with fixed costs of $1,400. If you sell the widgets for $120 per piece, the break-even point is

Answer 1

The break even point is 25 units.

Step-by-step explanation:

The break even point is where you have no gain, because the amount of sales in dollars is enoguh to cover your fixed costs. It is calculated

`(Fixed.costs)/(Contribution.margin)`

where the contribution margin (or CM) is the difference between price and variable cost. So, the CM in this case is 120 - 64 = 56.

Finally, the break even point is
`(1,400)/(56) = 25`