Figure 4-2.Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care.
-Refer to Figure 4-2. What is the break-even point in hours? (round to the nearest whole hour)

Question

Quizplus · Accepted Answer

The break-even point in hours is calculated by dividing the fixed costs by the contribution margin per hour. Contribution margin per hour is the difference between the charge per hour and the variable cost per hour ($35 - $21 = $14). Break-even point = $78,000 / $14 = 5,571 hours.