If a firm has a break-even point of 40,000 units and fixed costs are $60,000, what will the firm's operating profit be at sales of 30,000 units?
A) ($15,000)
B) $30,000
C) $15,000
D) ($14,500)

Question

Quizplus · Accepted Answer

The firm is below the break-even point by 10,000 units (40,000 - 30,000), meaning it incurs a loss. The loss is calculated as (10,000 units * contribution margin per unit). Since the break-even point is where total revenue equals total costs, the contribution margin per unit is $60,000 / 40,000 units = $1.50. Therefore, the loss is 10,000 * $1.50 = $15,000.

If a Firm Has a Break-Even Point of 40,000 Units