Your uncle is considering investing in a new company that will produce high quality stereo speakers.The sales price would be set at 1.50 times the variable cost per unit;the variable cost per unit is estimated to be $75.00;and fixed costs are estimated at $1,120,000.What sales volume would be required to break even,i.e. ,to have EBIT = zero?
A) 32,853
B) 28,075
C) 28,373
D) 33,152
E) 29,867

Question

Quizplus · Accepted Answer

To calculate the break-even point in units, we use the formula: Break-even point in units = Fixed Costs / (Sales price per unit - Variable cost per unit).Given:- Variable cost per unit = $75.00- Sales price = 1.50 times the variable cost = 1.50 * $75 = $112.50- Fixed costs = $1,120,000Break-even point in units = $1,120,000 / ($112.50 - $75) = $1,120,000 / $37.50 = 29,866.67 units.Since we can't sell a fraction of a unit, rounding to the nearest whole number gives 29,867 units.

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