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 in units?
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

The break-even point in units is calculated by dividing fixed costs by the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit. Since the operating profit is $15,000 for 10,000 units, the contribution margin must cover both the fixed costs and the profit. Therefore, the break-even point must be more than 6,000 units because $30,000 (fixed costs) divided by the contribution margin per unit will result in a number greater than 6,000.

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