Choice "C" is correct. The breakeven point in units is 200. The breakeven point in units is computed by dividing fixed costs by contribution margin per unit. Both figures are given in the problem and are used to compute breakeven point in units (students) as follows:
Fixed costs | 360,000 |
Contribution margin per student | ÷ 1,800 |
Breakeven point in students | 200 |
Choice "a" is incorrect. The breakeven point in students is not fixed costs divided by tuition per student (contribution margin plus variable costs) as suggested by this proposed solution.Choice "d" is incorrect. The breakeven point in students is not fixed costs divided by variable costs per student as suggested by this proposed solution.Choice "b" is incorrect. The breakeven point in students is not fixed costs divided by difference between contribution margin and variable costs as suggested by this proposed solution.
