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 the CCA deduction is $280,000.What is the EBIT break-even point for the number of games sold in this case?

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 the CCA deduction ($280,000). The contribution margin per unit is the selling price ($49) minus the variable cost per unit ($12). Therefore, the break-even point is ($1,200,000 + $280,000) / ($49 - $12) = 40,000 units.

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