If fixed costs are $250,000, the unit selling price is $125, and the unit variable costs are $73, what is the break-even sales (units) ? select one:

a. 3,425 units

b. 2,381 units

c. 2,000 units

d. 4,808 units

Your equation is 125x+73 c. 125•2000+73 = 250,073

Hi there! The answer is D. 4,808 units.

When we have a price of $125, - and a variable cost of $73, - this means that $52, - of the price can be used to pay off the fixed costs. This amount of $52, - is called the contribution margin.

To find our breaks even sale (in units) we must divide the total fixed cost by the contribution margin (since this is the amount of money you can spend per sold product to pay off the fixed costs). Hence,

$250,000 / $52 = 4808.

Therefore, the shop must sell 4808 units to be able to pay if the fixed costs. Hence, the break even sales in units is 4808.