The following data pertain to last month's operations:
$\begin{array}{|l|r|}
\hline \text { Selling price } & \$ 20 \text { per unit } \
\hline \text { Variable production cost } & \$ 12 \text { per unit } \
\hline \text { Fixed production cost } & \$ 3,000 \
\hline \text { Variable selling \& administrative expenses } & \$ 3 \text { per unit } \
\hline \text { Fixed selling \& administrative expenses } & \$ 1,500 \
\hline
\end{array}$
What is the break-even point in dollars?
A) $18,000.
B) $6,000.
C) $11,250.
D) $7,500.

Question

Quizplus · Accepted Answer

The break-even point is the point at which total revenue equals total cost. In this case, the total revenue is equal to the selling price per unit multiplied by the number of units sold. The total cost is equal to the variable production cost per unit multiplied by the number of units sold plus the fixed production cost plus the variable selling and administrative expenses per unit multiplied by the number of units sold plus the fixed selling and administrative expenses. Setting total revenue equal to total cost and solving for the number of units sold gives the break-even point.In this case, the selling price per unit is $20, the variable production cost per unit is $12, the fixed production cost is $3,000, the variable selling and administrative expenses per unit is $3, and the fixed selling and administrative expenses are $1,500. Substituting these values into the equation for the break-even point gives:$$20x = 12x + 3,000 + 3x + 1,500$$$$20x = 15x + 4,500$$$$5x = 4,500$$$$x = 900$$Therefore, the break-even point is 900 units. Multiplying the break-even point by the selling price per unit gives the break-even point in dollars:$$900 	imes 20 = 18,000$$Therefore, the break-even point in dollars is $18,000.

The Following Data Pertain to Last Month's Operations What Is the Break-Even Point in Dollars? A) $18,000

The Following Data Pertain to Last Month's Operations What Is the Break-Even Point in Dollars?
A) $18,000