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A company must decide if it will make or buy an item it needs. The company can make the item for $10 per unit, but must invest $15,000 irn tooling to achieve that capability. Alex Rogo has quoted a total price of $12 per unit to supply the quantity required (assume their fixed costs are included in the quoted price). Refer to the instruction above. What is the break-even quantity in this situation? 7,500 units 6,500 units 7,250 units

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Answer:

The correct answer is A.

Explanation:

Giving the following information:

Unitary variable cost= $10

Total fixed costs= $15,000

Selling price= $12

The break-even point analysis shows the number of units required to cover for the fixed costs.

To calculate the break-even point in units, we need to use the following formula:

Break-even point= fixed costs/ contribution margin

Break-even point= 15,000/ (12 - 10)= 7,500 units

fichoh

Answer: 7500 units.

Explanation:

Given the following ;

Fixed cost = $15,000

Selling price per unit = $12

Variable per unit cost = $10

Break even point (unit) is calculated by;

Point whereby the revenue generated from a certain number of units sold will result in a net profit of zero. That is no loss due to investment cost and no profit made.

Fixed cost ÷ Contribution margin

Contribution margin = selling price - variable cost

Here,

Contribution margin = $12- $10 =$12

Break even point (in unit) = $15,000 ÷ $2

Break even point (in unit) = 7500

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