Question

Finch Corporation sells products for $42 each that have variable costs of $9 per unit. Finch’s annual fixed cost is $759,000.

Required
Use the per-unit contribution margin approach to determine the break-even point in units and dollars.

Break-even point in units Break-even point in dollars

Answer 1

Selling price per unit = $42

Variable cost per unit = $9

Fixed cost = $759,000

Contribution margin per unit = Selling price per unit - Variable cost per unit

= 42-9

= $33

Contribution margin ratio = Contribution margin per unit/ Selling price per unit

= 33/42

= 78.5714286%

Break even point in units = Fixed cost / Contribution margin per unit

= 759,000/33

= 23,000 units

Break even point in dollars = Fixed cost/Contribution margin ratio

= 759,000/78.5714286%

= $966,000

Break-even point in units	23,000 units
Break-even point in dollars	$966,000

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