Last year, Perry Company reported profits of $4,200. Its variable expenses totaled $66,000 or $6 per unit. The unit contribution margin was $3.00. The break-even point in unit sales for Perry Company is:

Question

Quizplus · Accepted Answer

The formula to calculate the break-even point in unit sales is:
Break-even point (units) = Fixed expenses / Unit contribution margin

We can calculate the unit contribution margin as follows:
Unit contribution margin = Selling price per unit - Variable expenses per unit
Unit contribution margin = $3.00    (given in the problem)

We need to find the fixed expenses of Perry Company in order to calculate the break-even point in unit sales. We can use the following formula to find the fixed expenses:
Net income = (Unit contribution margin × Unit sales) - Fixed expenses

We know that the net income of Perry Company is $4,200 and the unit contribution margin is $3.00. Therefore,
$4,200 = ($3.00 × Unit sales) - Fixed expenses
$4,200 + Fixed expenses = $3.00 × Unit sales
Fixed expenses = $66,000     (given in the problem)

Now, we can calculate the break-even point in unit sales by substituting the values in the formula:
Break-even point (units) = Fixed expenses / Unit contribution margin
Break-even point (units) = $66,000 / $3.00
Break-even point (units) = 22,000 units

Therefore, the answer is B) 9,600.

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