How is the break-even point in units calculated?

How is the break-even point in units calculated?

• A. Fixed costs divided by sales price per unit
• B. Fixed costs divided by the contribution margin per unit
• C. Fixed costs divided by variable costs per unit
• D. Fixed costs divided by sales price minus variable costs per unit

Answer: (D)

The break-even point in units is determined by calculating how many units need to be sold to cover all fixed costs, with no profit or loss. This can be achieved by dividing fixed costs by the contribution margin per unit. The contribution margin is defined as the sales price per unit minus variable costs per unit. By using the correct method, you determine how much each unit contributes to covering fixed costs after accounting for the variable costs. Therefore, when fixed costs are divided by the difference between the sales price and variable costs, you correctly establish the number of units needed to reach the break-even point. This calculation ensures that every unit sold contributes to paying off the fixed costs until the break-even threshold is met.

The break-even point in units is determined by calculating how many units need to be sold to cover all fixed costs, with no profit or loss. This can be achieved by dividing fixed costs by the contribution margin per unit. The contribution margin is defined as the sales price per unit minus variable costs per unit.

By using the correct method, you determine how much each unit contributes to covering fixed costs after accounting for the variable costs. Therefore, when fixed costs are divided by the difference between the sales price and variable costs, you correctly establish the number of units needed to reach the break-even point. This calculation ensures that every unit sold contributes to paying off the fixed costs until the break-even threshold is met.