Break-even Analysis – Short Answer

Practice Question

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

A company produces 5,000 units of product with variable costs of $10 per unit, and fixed costs of $50,000. If the selling price is $25 per unit, what is the break-even point in units?

Answer +
Correct Answer: Approximately 3,334 units
Explanation +

Step 1: Identify key values – Variable Cost per Unit = $10, Fixed Costs = $50,000, Selling Price per Unit = $25

Step 2: Contribution Margin per Unit = $25 - $10 = $15

Step 3: Break-even Point = $50,000 ÷ $15 = 3,333.33

Step 4: Round as needed – Break-even point is approximately 3,334 units