Question

Moyas Corporation sells a single product for $10 per unit. Last year, the company's sales revenue was $200,000 and its net operating income was $8,000. If fixed expenses totaled $72,000 for the year, the break-even point in unit sales was:

Answer 1

Solution:
	Break-even point in unit sales	18,000	units
Working Notes:
	Profit = (Sales - Variable expenses) - Fixed expenses
	$8,000 = ($200,000 - Variable expenses) - $72,000
	$8,000 + $72,000 = $200,000 -Variable expenses
	Variable expenses =$200,000 - $80,000
	Variable expenses =$120,000
	CM ratio = Contribution margin ÷ Sales = ($200,000 - $120,000) ÷ $200,000
		=$80,000/$200,000
		=0.40
		= 40%
	Dollar sales to break even = Fixed expenses ÷ CM ratio
		=$72,000/40%
		=$180,000
	Unit sales to break even = $180,000 ÷ $10 per unit
		=18,000 units
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