Steeler Corporation is planning to sell 100,000 units for $2.00 per unit and will break even at this level of sales. Fixed expenses will be $75,000. What are the company's variable expenses per unit?
A)$0.75
B)$1.00
C)$1.25
D)$1.10

Question

Quizplus · Accepted Answer

To calculate the variable expenses per unit, we can use the formula:

Variable expenses = (Total sales revenue - Fixed expenses) / Number of units

At the breakeven point, the total sales revenue equals the fixed expenses. So, at 100,000 units and $2.00 per unit, the total sales revenue is:

100,000 units x $2.00 per unit = $200,000

Therefore, the variable expenses per unit are:

($200,000 - $75,000) / 100,000 units = $1.25 per unit

Steeler Corporation Is Planning to Sell 100,000 Units for $2