Minist Corporation sells a single product for $15 per unit. Last year, the company's sales revenue was $225,000 and its net operating income was $18,000. If fixed expenses totaled $72,000 for the year, the break-even point in unit sales was:
A)15,000
B)9,900
C)14,100
D)12,000

Question

Quizplus · Accepted Answer

The break-even point in units is calculated by dividing the total fixed expenses by the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit. First, calculate the total units sold: $225,000 / $15 = 15,000 units. Then, calculate the total variable costs: $225,000 - $72,000 (fixed expenses) - $18,000 (net operating income) = $135,000. The variable cost per unit is $135,000 / 15,000 = $9. The contribution margin per unit is $15 - $9 = $6. Finally, the break-even point in units is $72,000 / $6 = 12,000 units.

Minist Corporation Sells a Single Product for $15 Per Unit