The Hancock Corp. plans to sell its products for $100 each. Its variable cost per unit = $80, and its fixed costs for the year = $100,000. What level of sales will Hancock need to break even?
A) 1,000 units
B) 5,000 units
C) 10,0000 units
D) 20,000 units

Question

Quizplus · Accepted Answer

To break even, the total revenue must equal the total costs.

Total revenue = selling price x quantity sold = $100 x Q 
Total cost = total fixed cost + total variable cost = $100,000 + ($80 x Q)

Setting these two equal:

$100 x Q = $100,000 + ($80 x Q)

$20 x Q = $100,000

Q = 5,000 units