If the sale price per unit is $21.50, the variable expense per unit is $16.75, and the breakeven point in sales is $634,250, what are total fixed expenses?
A) $494,125
B) $29,500
C) $140,125
D) $179,864

Question

Quizplus · Accepted Answer

To find the total fixed expenses, we first calculate the contribution margin per unit, which is the sale price per unit minus the variable expense per unit: $21.50 - $16.75 = $4.75. Then, we divide the breakeven point in sales by the contribution margin per unit to find the number of units needed to break even: $634,250 / $4.75 = 133,526.32 units. Since the breakeven point in sales equals the total fixed expenses plus the total variable expenses, and knowing the breakeven sales and variable expense per unit, we can calculate the total fixed expenses. However, the correct approach without needing to calculate the number of units is to understand that at the breakeven point, total sales minus total variable expenses (which gives us total contribution margin) equals total fixed expenses. Therefore, the correct calculation is to find the contribution margin per unit ($4.75) and how it relates to the breakeven sales, not the calculation provided in the explanation. The correct answer is found by understanding that the breakeven point in sales ($634,250) divided by the contribution margin per unit gives us the number of units to break even, and this information is used to deduce that the fixed expenses are a part of the initial setup of the problem, not directly calculated through the number of units. The correct answer, based on the information given and the correct understanding of the breakeven analysis, is actually derived from knowing that the breakeven sales figure includes both the variable costs and the fixed costs, and the profit at this point is zero. Therefore, the fixed costs must be calculated based on the contribution margin and the breakeven sales figure, leading to the correct identification of the fixed expenses without the need for the intermediate step of calculating the exact number of units. My explanation mistakenly introduced an unnecessary calculation step that does not directly lead to the answer. The correct method involves using the breakeven point and the contribution margin to directly find the fixed expenses, which are inherent in the breakeven sales figure.

If the Sale Price Per Unit Is $21