Question

Longstreet inc. has fixed operating costs of $300,000, variable costs of $2.50 per unit produced, and its product sells for $3.70 per unit. what is the company's break-even point, i.e., at what unit sales volume would income equal costs?

Answer 1

Operating cost is $30000
Variable cost per unit is $ 2.50
Selling cost per unit is $3.70
Income for per unit sold = selling cost - variable cost
= 3.70 - 2.50 = 1.20
Income for per unit sold is $1.20
The value of Sales volume to equal the cost can be obtained by the following formula
Sales volume * Income per unit sold = operating cost
sales volume * 1.20 = 300000
sales volume = 3000000/1.20 = 250000 Hence Total sales volume unit to equal the operating cost is 250000 units