Cunningham Inc. sells MP3 players for $60 each. Variable costs are $40 per unit and fixed costs total $120000. What sales are needed by Cunningham to break even?
A) $160000.
B) $300000.
C) $360000.
D) $480000.

Question

Quizplus · Accepted Answer

The break-even point is where total revenue equals total costs, or in other words, where profit equals zero. To find the break-even point, we can use the formula:

Break-even point = Fixed costs / (Price - Variable costs)

Plugging in the given values, we get:

Break-even point = $120,000 / ($60 - $40) = $120,000 / $20 = 6,000 units

To find the sales needed to break even, we can multiply the break-even point by the selling price:

Sales needed to break even = 6,000 units x $60 = $360,000

Therefore, the answer is choice C, $360,000.