A company is considering a project with a cash break-even point of 14,500 units. The selling price is $14 a unit and the variable cost per unit is $8. What is the projected amount of fixed costs?
A) $87,000
B) $94,000
C) $109,000
D) $116,000
E) $203,000

Question

Quizplus · Accepted Answer

The fixed costs can be calculated by finding the contribution margin per unit (selling price - variable cost) and then multiplying it by the break-even volume. The contribution margin per unit is $14 - $8 = $6. Therefore, the fixed costs are 14,500 units * $6 = $87,000.

A Company Is Considering a Project with a Cash Break-Even