Question

How many units must Lamar produce and sell in order to break-even?


Lamar has the following data: 


Selling Price $ 40 

Variable manufacturing cost $ 22

Fixed manufacturing cost $150,000 per month 

Variable selling & administrative costs $ 6

Fixed selling & administrative costs $120,000 per month 


How many units must Lamar produce and sell in order to break-even? 

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Answer #1

Break-even units = Fixed costs / Contribution margin per unit

Break-even units = ($150,000 + $120,000) / ($40 – $22 – $6)

Break-even units = 22,500 units

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