A company has a breakeven point of 12,000 units per year

Accounting Nov 30, 2020

A company has a breakeven point of 12,000 units per year. The selling price of one unit is $90 and the variable cost is $40 per unit. What are the company’s yearly fixed costs?

a.$480,000 b.$600,000 c.$1,080,000 d.$1,560,000

Expert Solution

Answer: Option b $600,000

Working:

Breakeven point (units) = Fixed cost/ contribution margin per unit

12,000=Fixed cost/50

Fixed cost = 12,000*$50

=$600000

Note:

Contribution margin per unit = selling price – variable cost per unit

=$90-$40=$50

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