The following is last month's contribution format income statement: $$\begin{array} { | l | c | }
\hline \text { Sales (10,000 units) } & \$ 1,200,000 \
\hline \text { Less variable expenses } & 800,000 \
\hline \text { Contribution margin } & 400,000 \
\hline \text { Less fixed expenses } & 240,000 \
\hline \text { Net income } & \$ 160,000 \
\hline
\end{array}$$ What is the company's break-even sales in units?

Question

The following is last month's contribution format income statement: $$\begin{array} { | l | c | } 
\hline \text { Sales (10,000 units) } & \$ 1,200,000 \
\hline \text { Less variable expenses } & 800,000 \
\hline \text { Contribution margin } & 400,000 \
\hline \text { Less fixed expenses } & 240,000 \
\hline \text { Net income } & \$ 160,000 \
\hline
\end{array}$$ What is the company's break-even sales in units?

Quizplus · Accepted Answer

To find the break-even point in units, we use the formula: Break-even point in units = Fixed expenses / (Selling price per unit - Variable cost per unit). From the given data, the selling price per unit is $1,200,000 / 10,000 units = $120. The variable cost per unit is $800,000 / 10,000 units = $80. Fixed expenses are $240,000. Thus, the break-even point in units = $240,000 / ($120 - $80) = $240,000 / $40 = 6,000 units.

The Following Is Last Month's Contribution Format Income Statement What Is the Company's Break-Even Sales in Units? A)12,000 Units

The Following Is Last Month's Contribution Format Income Statement What Is the Company's Break-Even Sales in Units?
A)12,000 Units