A small company can produce 500 dolls per week. The doll retails for $30. The variable costs are $7.50 per doll and fixed costs are $9,000 per week. What is the break-even point expressed as a percent of capacity?

Question

Quizplus · Accepted Answer

The break-even point in units is found by dividing the fixed costs by the contribution margin per unit (price - variable costs). Here, it's $9,000 / ($30 - $7.50) = $9,000 / $22.50 = 400 units. To find the break-even point as a percent of capacity, divide the break-even point in units by the total capacity and multiply by 100. Thus, (400 / 500) * 100 = 80%.

A Small Company Can Produce 500 Dolls Per Week