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22 April, 22:56

Stone Corporation is a manufacturing company that makes small electric motors it sells for $45 per unit. The variable costs of production are $25 per motor, and annual fixed costs of production are $800,000. How many units of product must Stone make and sell to break even?

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  1. 22 April, 23:01
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    40,000 units

    Explanation:

    Given that,

    Selling price per unit = $45 per unit

    Variable cost per unit = $25

    Fixed cost = $800,000

    Contribution margin per unit:

    = Selling price per unit - variable cost per unit

    = $45 - $25

    = $20

    Break - Even units:

    = Fixed cost : Contribution margin per unit

    = $800,000 : $20

    = 40,000 units

    Therefore, the Break - Even sales in units are 40,000.
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