April Industries sells a product with a contribution margin of $12 per unit fixed costs of $223200 and sales for the current year of $300000. How much is April's break-even point?
A) 13800 units
B) $76800
C) 18600 units
D) 6400 units

Question

Quizplus · Accepted Answer

First, we need to calculate the contribution margin ratio:
Contribution margin ratio = (Contribution margin per unit / Sales price per unit) x 100%
= ($12 / $x) x 100% = (12 / x) x 100%
To find x, we can use the given information that sales for the current year were $300,000:
Sales = Number of units sold x Sales price per unit
$300,000 = Number of units sold x $x
Number of units sold = $300,000 / $x
Now we can substitute the expression for the number of units sold in the equation for the contribution margin ratio and solve for x:
Contribution margin ratio = (12 / x) x 100%
= (12 / ($300,000 / $x)) x 100%
= (12x / $300,000) x 100%
= 0.04x x 100%
= 4x%
Next, we can use the break-even formula:
Break-even point (in units) = Fixed costs / Contribution margin per unit
= $223,200 / $12
= 18,600 units
Therefore, the correct answer is C) 18600 units.

April Industries Sells a Product with a Contribution Margin of $12