A recent income statement of Safety Corporation reported the following data: If these data are based on the sale of 20,000 units, the break-even point would be:

Question

A recent income statement of Safety Corporation reported the following data:  If these data are based on the sale of 20,000 units, the break-even point would be:

Quizplus · Accepted Answer

To find the break-even point we need to calculate the total fixed costs and contribution margin per unit. 
Using the formula: 
Break-even point (in units) = total fixed costs / contribution margin per unit

Total fixed costs = $360,000
Contribution margin per unit = $30 – $15 = $15

Therefore, the break-even point in units is:
$360,000 / $15 per unit = 24,000 units

However, the income statement data is based on the sale of 20,000 units. We need to adjust the break-even point accordingly:
Break-even point in units = (total fixed costs / contribution margin per unit) / (actual sales / total units)
Break-even point in units = ($360,000 / $15 per unit) / (20,000 / 24,000)
Break-even point in units = 12,500 units.

Thus, the correct answer is C.

A Recent Income Statement of Safety Corporation Reported the Following