The break-even point is closest to:

Question

Quizplus · Accepted Answer

The Break-even point is the point where the total revenue and total cost intersect, which means that the profit is zero.
The formula to calculate the break-even point is:
Break-even point = Fixed Costs / (Price per unit - Variable costs per unit)

Using the data given in the question:
Fixed costs = $120,000
Price per unit = $15
Variable cost per unit = $7

Break-even point = $120,000 / ($15 - $7) =  $120,000 / $8 = 15,000 units

However, there is an additional information given that the company plans to invest another $75,000 in marketing to increase sales.

Fixed costs now = $120,000 + $75,000 = $195,000

The new break-even point is:
Break-even point = $195,000 / ($15 - $7) =  $195,000 / $8 = 24,375 units

Since the answer choices only give approximations, the closest option is C) 21,500 units.

The Break-Even Point Is Closest To