Dane Company has a break-even point of 120,000 units. If the firm's sole product sells for $40 and fixed costs total $480,000, the variable cost per unit must be:
A) $4.
B) $36.
C) $44.
D) an amount that cannot be derived based on the information presented.
E) an amount other than $4, $36, or $44, but one that can be derived based on the information presented.

Question

Quizplus · Accepted Answer

The variable cost per unit can be calculated using the formula: Variable Cost per Unit = Selling Price per Unit - (Total Fixed Costs / Break-Even Quantity). Plugging in the given values: Variable Cost per Unit = $40 - ($480,000 / 120,000) = $40 - $4 = $36.

Dane Company Has a Break-Even Point of 120,000 Units