How many total dollars of sales must Windblow Company sell to break even,if the selling price per unit is $10,variable costs are $5.00 per unit,and fixed costs are $10,000?

Question

Quizplus · Accepted Answer

To break even, Windblow Company must cover its fixed costs with the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit, which is $10 - $5 = $5. The fixed costs are $10,000. To find the break-even point in dollars, divide the fixed costs by the contribution margin ratio (contribution margin per unit divided by selling price per unit). The break-even point in units is $10,000 / $5 = 2,000 units. To find the total dollars of sales, multiply the break-even point in units by the selling price per unit: 2,000 units * $10 = $20,000.

How Many Total Dollars of Sales Must Windblow Company Sell