Question

If TechCor has fixed costs of $60,000, variable costs of $1.20/unit, a sales price/unit of $7, and depreciation expense of $25,000, what is their cash breakeven in units?

A. 6,034 units

B. 11,458 units

C. 12,375 units

D. 45,833 units

Answer 1

To calculate the cash breakeven point in units, divide the fixed costs by the contribution margin per unit. In this case, the answer is 10,345 units.

Step-by-step explanation:

To calculate the cash breakeven point in units for TechCor, we need to determine the number of units they need to sell in order to cover all their costs and have zero profit or loss. The formula for calculating the cash breakeven point is:

Cash Breakeven Point (in units) = Fixed Costs / Contribution Margin per Unit

The contribution margin per unit is calculated by subtracting the variable cost per unit from the sales price per unit. In this case, the contribution margin per unit is $7 - $1.20 = $5.80. Plugging this into the formula, we get:

Cash Breakeven Point (in units) = $60,000 / $5.80

Solving this equation gives us the answer of 10,345 units.