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Fixed costs are $8,000, the selling price is $18 per unit and the variable cost is $10 per unit. What is the breakeven point in units?
A1,000 units
B800 units
C444 units
D1,600 units
Answer & Solution
Correct answer: A. 1,000 units
1. Breakeven in units divides total fixed costs by the unit contribution margin.
2. Unit contribution margin is $18 minus $10, which is $8.
3. $8,000 divided by $8 gives 1,000 units per month.
4. At 1,000 units the contribution margin of $8,000 exactly equals fixed costs, so operating income is zero.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 5.3 Breakeven Point_
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