Norman Company sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $60,000. What sales are needed by Norman to break even?
A) $80,000.
B) $150,000.
C) $180,000.
D) $240,000.

Question

Quizplus · Accepted Answer

To break even, the company needs to generate enough revenue to cover all its costs. 
Total cost = Fixed cost + Variable cost 
Fixed cost = $60,000 
Variable cost per unit = $40 
Selling price per unit = $60 
Contribution margin per unit = Selling price per unit - Variable cost per unit = $60 - $40 = $20 
To break even, the company needs to sell enough units to cover its fixed cost and variable cost. 
Break-even point (in units) = Fixed cost / Contribution margin per unit = $60,000 / $20 per unit = 3,000 units 
Break-even point (in dollars) = Break-even point (in units) x Selling price per unit = 3,000 x $60 = $180,000 
Therefore, the sales needed by Norman to break even is $180,000.

Norman Company Sells MP3 Players for $60 Each