What is the breakeven point in units for a product that sells for $10 if fixed costs are $4,000 and variable costs are 20% of sales?
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What is the breakeven point in units for a product that sells for $10 if fixed costs are $4,000 and variable costs are 20% of sales?

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Detailed Answer

Answer (B) is correct. The breakeven point is where profit is zero and sales = fixed costs + variable costs, so 10x = 4,000 + 2x. Thus, 8x = 4,000, or x = 500 units. Alternatively, dividing the $4,000 of fixed costs by the $8 per unit contribution margin gives the same result.