Assume a firm is developing, manufacturing, and selling a basic software package at $300 per copy. Raw material and direct labor total $100 per unit. Fixed costs are $150,000. If unit sales are 3,000 per year, what will be the break-even point in units?

Question

Quizplus · Accepted Answer

The break-even point in units can be calculated using the following formula:

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

In this case, the fixed costs are $150,000, the price per unit is $300, and the variable cost per unit is $100 (raw material + direct labor).

Break-even point (units) = $150,000 / ($300 - $100) = 750 units

Therefore, the best choice is C, as it represents the calculated break-even point in units.

Assume a Firm Is Developing, Manufacturing, and Selling a Basic