Question

Michael Vick has written a self-improvement book that has the following cost characteristics: Selling price $20.00...

Michael Vick has written a self-improvement book that has the following cost characteristics:
Selling price $20.00 per book
Variable cost per unit:
Production $5.00
Selling & administrative 3
Fixed costs:
Production $90,000 per year
Selling & administrative 12,000 per year
How many units must be sold to break-even?
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Homework Answers

Answer #1

Answer:

8,500 units

Calculation:

Selling Price (A) $                    20
Variable cost per unit [5+3] (B) $                      8
Contribution per unit (C=A-B) $                    12

Now,

Break even Point (in units) = Fixed Cost / Contribution per unit

= [90,000 + 12,000] / 12

= 8,500 units

In case of any doubt, please feel free to comment.

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