Question

At the break-even point of 400 units, the variable costs were $400 and the fixed costs...

At the break-even point of 400 units, the variable costs were $400 and the fixed costs were $200. What will the 401st unit sold contribute to profit before income taxes?

Select one:

a. $ 0

b. $ 0.50

c. $ 1.50

d. $ 1.00

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Homework Answers

Answer #1

Break even point = 400 units

Variable cost at breakeven point = $400

Fixed cost at breakeven point = $200

Total cost at breakeven point = Variable cost at breakeven point + Fixed cost at breakeven point

= 400 + 200

= $600

At the breakeven point, total cost is equal to sales.

Hence, sales revenue at 400 units = $600

Selling price per unit = Sales/Number of units

= 600/400

= $1.50

Variable cost per unit = Total variable cost/Number of units

= 400/400

= $1

Contribution margin per unit = Selling price per unit - Variable cost per unit

= 1.50 - 1

= $0.50

Hence, 401st unit will contribute to profit = $0.50

Correct option is (b)

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