Break-even analysis. Monochrome Sun Glasses has found that its pretax operating cash flow basis break-even number of glasses sold is 770,000 pairs. If each pair is sold for $25 and the variable cost per unit is $15, then what is the amount of Monochrome's fixed costs?

Question

Quizplus · Accepted Answer

The break-even point in units is calculated as Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Given the break-even point is 770,000 units, selling price is $25, and variable cost is $15, the fixed costs are 770,000 * ($25 - $15) = $7,700,000.

Break-Even Analysis