Mitchell Company sells its product for $100 per unit. The company's accountant provided the following cost information: What is the company's break-even point in units?
A) 1,000
B) 750
C) 2,600
D) 4,000

Question

Mitchell Company sells its product for $100 per unit. The company's accountant provided the following cost information:  What is the company's break-even point in units?
A) 1,000 
B) 750 
C) 2,600 
D) 4,000

Quizplus · Accepted Answer

Contribution margin per unit = Selling price per unit - Variable costs per unit
Contribution margin per unit = $100 per unit - [(45% + 20% + 10%) × $100 per unit] = $25 per unit
Break-even point in units = Fixed costs ÷ Contribution margin per unit
Break-even point in units = ($25,000 + $15,000 + $25,000) ÷ $25 per unit = 2,600 units

Mitchell Company Sells Its Product for $100 Per Unit