A firm has operating profit of $15,000 on unit sales of 10,000 units. Fixed costs are $30,000. What is the firm's break-even sales level?
A)Less than 6,000 units.
B)6,000 units.
C)More than 6,000 units
D)There is not enough information to determine the unit break-even point.

Question

Quizplus · Accepted Answer

To find the break-even point, we need to determine the contribution margin per unit. The operating profit is $15,000, and fixed costs are $30,000, so total contribution margin is $45,000. Contribution margin per unit is $45,000/10,000 = $4.50. Break-even point is fixed costs divided by contribution margin per unit: $30,000/$4.50 = 6,666.67 units, which is more than 6,000 units.

A Firm Has Operating Profit of $15,000 on Unit Sales