The Oliver Company plans to market a new product. Based on its market studies, Oliver estimates that it can sell up to 2,000 units in 2005. The selling price will be $5 per unit. Variable costs are estimated to be 20% of total revenue. Fixed costs are estimated to be $6,300 for 2005. How many units should the company sell to break even?

I tried calculating, but I don't know what to do with the 20%.
Help Please? Thank You.

To calculate the breakeven point, you need to determine the number of units the company needs to sell in order to cover all of its costs (both fixed and variable). Here are the steps to calculate the breakeven point:

Step 1: Calculate the contribution margin per unit.
The contribution margin per unit is the amount left after deducting the variable costs from the selling price. In this case, the variable costs are estimated to be 20% of total revenue, so the contribution margin per unit would be:

Contribution margin per unit = Selling price - Variable costs per unit
= $5 - (20% * $5)
= $5 - ($1)
= $4

Step 2: Calculate the breakeven point in units.
The breakeven point can be calculated by dividing the total fixed costs by the contribution margin per unit. In this case, the fixed costs are estimated to be $6,300, so the breakeven point in units would be:

Breakeven point (in units) = Fixed costs / Contribution margin per unit
= $6,300 / $4
= 1575 units

Therefore, the company needs to sell 1575 units to break even.

To calculate the number of units the company needs to sell to break even, you need to consider the concept of contribution margin. The contribution margin is the amount remaining from each unit sold after deducting the variable costs.

In this case, the variable costs are estimated to be 20% of total revenue. This means that for each unit sold, 20% of the selling price will be attributed to the variable costs. The remaining 80% will contribute towards covering fixed costs and generating profit.

To calculate the contribution margin, you can subtract the variable cost percentage from 100%:
Contribution Margin = 100% - Variable Cost Percentage

In this case, the variable cost percentage is 20%, so the contribution margin is:
Contribution Margin = 100% - 20% = 80%

Now, let's calculate the contribution margin per unit:
Contribution Margin per Unit = Selling Price per Unit * Contribution Margin

In this case, the selling price is $5 per unit and the contribution margin is 80%, so the contribution margin per unit is:
Contribution Margin per Unit = $5 * 80% = $4

To break even in terms of covering fixed costs, the company needs to generate enough revenue to cover the fixed costs. The formula to calculate the break-even point in terms of units is:
Breakeven Point (in units) = Fixed Costs / Contribution Margin per Unit

In this case, the fixed costs are $6,300 and the contribution margin per unit is $4, so the break-even point is:
Breakeven Point (in units) = $6,300 / $4 = 1,575 units

Therefore, the company needs to sell at least 1,575 units to break even in terms of covering fixed costs.