Gamba Corp. sells its product for $30. Variable costs are $10 per unit. At the current volume of 40,000 units sold per year, the company is just breaking even. Given these data, the annual fixed costs are:

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Quizplus · Accepted Answer

The break-even point occurs when total revenue equals total costs (fixed + variable). Revenue per unit is $30, and variable cost per unit is $10, so the contribution margin per unit is $20. At 40,000 units, the contribution margin covers the fixed costs, so fixed costs are 40,000 units * $20 = $800,000.