Regency Inc.makes disposable cap and gown sets for graduations.Each cap and gown set sells for $15.The average variable cost for manufacturing 10 cap and gown sets is $100.Total fixed costs for the year equal $65,000.What is the break-even point in units?
A) 4,334
B) 1,300
C) 13,000
D) 765

Question

Quizplus · Accepted Answer

The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit. Here, the selling price per unit is $15, and the variable cost per unit is $10 (since $100/10 sets = $10 per set). Therefore, the contribution margin per unit is $5. The break-even point is $65,000 / $5 = 13,000 units.