What is the break-even point in units when fixed costs are $8,000, price per unit is $50, and variable cost per unit is $30?

What is the break-even point in units when fixed costs are $8,000, price per unit is $50, and variable cost per unit is $30?

• A. 160 units
• B. 260 units
• C. 320 units
• D. 400 units

Answer: (D)

The amount each unit contributes to covering fixed costs is the difference between price and variable cost: 50 minus 30 equals 20 per unit. To break even, fixed costs must be covered entirely by this contribution, so the required units are 8,000 divided by 20, which equals 400 units. Checking the math: selling 400 units brings in 400 × 50 = 20,000 in revenue, while variable costs are 400 × 30 = 12,000, and fixed costs are 8,000, totaling 20,000. Since revenue equals total costs, you’re at break-even. If you sold more units, profit would be 20 per unit times the extra units.

The amount each unit contributes to covering fixed costs is the difference between price and variable cost: 50 minus 30 equals 20 per unit. To break even, fixed costs must be covered entirely by this contribution, so the required units are 8,000 divided by 20, which equals 400 units. Checking the math: selling 400 units brings in 400 × 50 = 20,000 in revenue, while variable costs are 400 × 30 = 12,000, and fixed costs are 8,000, totaling 20,000. Since revenue equals total costs, you’re at break-even. If you sold more units, profit would be 20 per unit times the extra units.