Given the following notation,what is the break-even sales level in units?
SP = selling price per unit,FC = total fixed cost,VC = variable cost per unit
A)SP/(FC/VC)
B)FC/(VC/SP)
C)VC/(SP - FC)
D)FC/(SP - VC)

Question

Quizplus · Accepted Answer

The break-even point is where the total revenue equals the total cost, which is the sum of the fixed cost and the variable cost.

Total Revenue = Selling Price * Units Sold
Total Cost = Fixed Cost + Variable Cost * Units Sold

At the break-even point, Total Revenue = Total Cost:

Selling Price * Units Sold = Fixed Cost + Variable Cost * Units Sold

Solving for Units Sold gives:
Units Sold = Fixed Cost / (Selling Price - Variable Cost)

Therefore, the correct formula for calculating the break-even sales level in units is FC/(SP-VC), which corresponds to choice D.

Given the Following Notation,what Is the Break-Even Sales Level in Units