Asked by shivangi thakur on Jun 16, 2024
Verified
Cunningham Inc. sells MP3 players for $60 each. Variable costs are $40 per unit and fixed costs total $120000. What sales are needed by Cunningham to break even?
A) $160000.
B) $300000.
C) $360000.
D) $480000.
Break Even
The point at which total costs and total revenues are equal, resulting in no net loss or gain for the business.
Variable Costs
Costs that vary directly with the level of production or business activity, such as materials, labor, and overhead expenses.
- Establish the break-even points in varied instances, measuring in both units and the monetary value of sales transactions.
Verified Answer
TB
Tommy BandyJun 22, 2024
Final Answer :
C
Explanation :
The break-even point is where total revenue equals total costs, or in other words, where profit equals zero. To find the break-even point, we can use the formula:
Break-even point = Fixed costs / (Price - Variable costs)
Plugging in the given values, we get:
Break-even point = $120,000 / ($60 - $40) = $120,000 / $20 = 6,000 units
To find the sales needed to break even, we can multiply the break-even point by the selling price:
Sales needed to break even = 6,000 units x $60 = $360,000
Therefore, the answer is choice C, $360,000.
Break-even point = Fixed costs / (Price - Variable costs)
Plugging in the given values, we get:
Break-even point = $120,000 / ($60 - $40) = $120,000 / $20 = 6,000 units
To find the sales needed to break even, we can multiply the break-even point by the selling price:
Sales needed to break even = 6,000 units x $60 = $360,000
Therefore, the answer is choice C, $360,000.
Learning Objectives
- Establish the break-even points in varied instances, measuring in both units and the monetary value of sales transactions.