Jasper Corp.has a selling price of $30,and variable costs of $20 per unit.When 12,000 units are sold,profits equaled $70,000.How many units must be sold to break-even?
A)19,000
B)12,000
C)14,333
D)5,000

Question

Quizplus · Accepted Answer

To calculate the break-even point, we use the formula: Break-even point in units = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Given that the profit is $70,000 when 12,000 units are sold, we first find the fixed costs. Profit = Total Revenue - Total Costs. Total Revenue = Selling Price per Unit * Number of Units Sold = $30 * 12,000 = $360,000. The variable costs = Variable Cost per Unit * Number of Units Sold = $20 * 12,000 = $240,000. To find the total costs when the profit is $70,000, we rearrange the profit formula: Total Costs = Total Revenue - Profit = $360,000 - $70,000 = $290,000. Since Total Costs = Fixed Costs + Variable Costs, and we know the variable costs are $240,000, the fixed costs = $290,000 - $240,000 = $50,000. Now, using the break-even formula: Break-even point = $50,000 / ($30 - $20) = $50,000 / $10 = 5,000 units.