Rogers Racers makes toy race cars that sell for $12 each with a variable cost of $5 per car.Annual fixed costs are $7,000.If Rogers Racers sells 50 units fewer than break-even, how much loss would the company recognize on its income statement?

Question

Quizplus · Accepted Answer

The break-even point in units can be calculated using the formula: Break-even units = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Here, it would be $7,000 / ($12 - $5) = 1,000 units. Selling 50 units fewer than break-even (1,000 - 50 = 950 units) means not covering $350 of fixed costs (50 units * $7 contribution margin per unit), which equals the loss recognized.

Rogers Racers Makes Toy Race Cars That Sell for $12