Wallace Incorporated sells its products for $550 per unit. Variable costs are currently 20% of sales revenue. Fixed expenses are $198,000 per year. What is the breakeven point in units at the current selling price?

Question

Quizplus · Accepted Answer

To calculate the breakeven point, we need to use the formula:

Breakeven point (units) = Fixed costs / Contribution margin per unit

Contribution margin per unit = Selling price per unit - Variable costs per unit

In this case, the selling price per unit is $550, and the variable costs are 20% of sales revenue, which is $550 x 0.2 = $110 per unit.

Therefore, the contribution margin per unit is:

Contribution margin per unit = $550 - $110 = $440

Plugging this into the breakeven formula:

Breakeven point (units) = $198,000 / $440 = 450 units

So the breakeven point is 450 units. Choice C is the correct answer.

Wallace Incorporated Sells Its Products for $550 Per Unit