Question

Rosewood Chiropractic Clinic is considering a new product whose fixed costs are $1,500. Rosewood has decided it needs to charge $25 per unit and have a variable cost of $15. What is the breakeven point in quantity and in dollars?

Answer 1

Answer:

150 units and $ $3,750

Explanation:

As per the cost volume analysis concept, the break-even point is calculated using the following formula

Break-even = fixed cost/ contribution margin per unit

Contribution margin per unit = selling price -variable cost

In this case:

fixed costs :$1500

selling price: $25

variable costs: $15

contribution margin per unit;

=$25-$15

=$10

Break-even point

= $1500/10

=150 units

break-even in dollars will the break-even units multiplied by selling price

=150 x $25

=$3,750