Break-even Analysis – Short Answer

Practice Question

Intro to Managerial Accounting
Decision-Making: Cost-Volume-Profit Analysis
Break-even Analysis
Short Answer

A company has fixed costs of $100,000 and a contribution margin per unit of $20. What is the sales volume required to break even?

Answer +
Correct Answer: 5,000 units
Explanation +

Step 1: Identify Key Variables – Fixed Costs = $100,000, Contribution Margin = $20

Step 2: Calculate Break-even Sales Volume – Break-even Volume = Fixed Costs ÷ Contribution Margin = 100,000 ÷ 20 = 5,000 units

Step 3: Conclusion – The sales volume required to break even is 5,000 units