Answer (B) is correct . The breakeven point is where profit is zero and sales = fixed costs + variable costs, so 10x = 4,000 + 2x. Thus, 8x = 4,000, or x = 500 units. Alternatively, dividing the $4,000 of fixed costs by the $8 per unit contribution margin gives the same result.
Answer (A) is incorrect because Using an erroneous contribution margin results in 250.
Answer (C) is incorrect because Using the inverse of the contribution margin results in 800.
Answer (D) is incorrect because Applying the 20% to fixed costs instead of sales results in 2,000.
|
