Smee Inc. produces and sells a single product. The selling price of the product is $130.00 per unit and its variable cost is $52.00 per unit. The fixed expense is $281,580 per month. The break-even in monthly unit sales is closest to:
A)3,730 units
B)5,415 units
C)2,166 units
D)3,610 units

Question

Quizplus · Accepted Answer

Break-even point (units) = Fixed costs ÷ Contribution margin per unit
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $130.00 - $52.00 = $78.00
Break-even point (units) = $281,580 ÷ $78.00 = 3,610 units

Therefore, the closest answer is D) 3,610 units.

Smee Inc Produces and Sells a Single Product