A maker of computer games expects to sell 500,000 games at a price of $49 per game.These units cost $12 to produce.Selling,general,and administrative expenses are $1.2 million and depreciation is $280,000.What is the EBIT break-even point for the number of games sold in this case?
A)$24,865
B)$30,192
C)$30,204
D)$40,000

Question

Quizplus · Accepted Answer

The EBIT break-even point is calculated by dividing the total fixed costs by the contribution margin per unit. Fixed costs include selling, general, and administrative expenses ($1.2 million) and depreciation ($280,000), totaling $1,480,000. The contribution margin per unit is the selling price ($49) minus the variable cost per unit ($12), which is $37. Therefore, the break-even point is $1,480,000 / $37 = 40,000 units.

A Maker of Computer Games Expects to Sell 500,000 Games