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:

Question

Quizplus · Accepted Answer

To find the variable cost per unit, we can use the formula for the break-even point:

Break-even point = Fixed costs / (Price - Variable cost per unit)

120,000 = $480,000 / ($40 - Variable cost per unit)

Multiplying both sides by ($40 - Variable cost per unit), we get:

120,000($40 - Variable cost per unit) = $480,000

Expanding and simplifying, we get:

$4,800,000 - 120,000(Variable cost per unit) = $480,000

Subtracting $4,800,000 from both sides:

-120,000(Variable cost per unit) = -$4,320,000

Dividing both sides by -120,000:

Variable cost per unit = $36

Therefore, the correct answer is B.

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