Last year,Perry Company reported profits of $4,200.Its total variable expenses were $66,000,or $6 per unit.The unit contribution margin was $3.00.What is the break-even point in units for Perry Company?

Question

Quizplus · Accepted Answer

The break-even point can be calculated using the formula:

Break-even point (in units) = Fixed costs / Unit contribution margin

In this case, we do not have the fixed costs given, but we can calculate them using the profit formula:

Profit = Total revenue - Total variable costs - Fixed costs

Re-arranging the formula, we get:

Fixed costs = Total revenue - Total variable costs - Profit

Plugging in the given values, we get:

Fixed costs = (4,200 + 66,000 / 6) - 4,200
Fixed costs = 28,800

Now we can use the break-even point formula:

Break-even point (in units) = 28,800 / 3
Break-even point (in units) = 9,600

Therefore, the best choice is B, 9,600 units.

Last Year,Perry Company Reported Profits of $4,200