Q6SE - Horngren'S Financial And Managerial Accounting

Question

Calculating breakeven point in units, contribution margin given Mackler, Inc. sells a product with a contribution margin of \(50 per unit. Fixed costs are \)8000 per month. How many units must Mackler sell to break even?

 

Step-by-Step Solution

Answer

Mackler, Inc. has to sell 1600 units to achieve a breakeven point.

 

Step 1: Definition of breakeven point

A breakeven point is a no-profit and no loss point. It consists of all the variable costs and fixed costs. Total revenue is equal to the total cost. Three methods to calculatethe breakeven point.

The formula for the breakeven point for the above question is Fixed cost /Contribution

Step 2: Calculation of breakeven point

The contribution margin is $50 and the fixed cost is $80,000.

 $\begin{array}{rcl}\mathbf{Breakevenpoint}& \mathbf{=}& \frac{\mathbf{fixedcost}}{\mathbf{contribution}}\\ & \mathbf{=}& \frac{\mathbf{80},\mathbf{000}}{\mathbf{50}}\\ & \mathbf{=}& \mathbf{1},\mathbf{600}\mathbf{Units}\\ & & \end{array}$

Mackler, Inc. has to sell 1600 units to achieve a breakeven point.