Question

American Apparel, Inc. has fixed annual operating costs of
**$325,000**. The average selling price per

unit
is **$45.00**and the variable cost per unit is
**$34.00**. Based on this information,
calculate the

breakeven sales level in units.

Answer #1

**Solution:
**

The formula for calculating Break even Point in sales units is

= Fixed cost / Contribution margin

Where Contribution margin = Selling price per unit – Variable cost per unit

As per the information given in the question we have

Selling price per unit = $ 45 ; Variable cost per unit = $ 34

Contribution margin = $ 45 - $ 34 = $ 11 ; Fixed Cost = $ 325,000

Therefore the Break even point = $ 325,000 / $ 11 = 29,545.45

**The Break even sales in units = 29,545.45
units**

**= 29,545 units ( when rounded off to the nearest whole
number )**

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