Tim Marlow,the owner of The Clock Works,wanted to know how many clocks he must sell in order to cover his fixed cost at a given price.Tim knew that he had a fixed cost of $20,000 for equipment,taxes,and a bank loan.He also had a unit variable cost of $20 per clock for labour,materials,and promotional costs.If the price Tim charges for each of his clocks is $40,what is his break-even point quantity?
A)10 clocks
B)100 clocks
C)1,000 clocks
D)10,000 clocks

Question

Quizplus · Accepted Answer

The break-even point is calculated by dividing the fixed costs by the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit. Here, it is $40 - $20 = $20. Therefore, the break-even point is $20,000 / $20 = 1,000 clocks.

Tim Marlow,the Owner of the Clock Works,wanted to Know How