A division of a corporation manufactures bicycle pumps. Each pump sells for $9, and the variable cost of producing each unit is 40% of the selling price. The monthly fixed costs incurred by the division are $50,000. What is the break-even point for the division?
a) break-even production 1,852 units; break-even revenue $166,662
b) break-even production 1,852 units; break- even revenue $83,331
c) break-even production 9,259 units; break- even revenue $166,662
d) break-even production 9,259 units; break- even revenue $83,331
thank you
To calculate the break-even point for the division, we need to determine the number of units the division needs to sell in order to cover its fixed costs.
Let's calculate the variable cost per unit first. The variable cost is 40% of the selling price, which means it is 0.4 * $9 = $3.60 per unit.
Next, we calculate the contribution margin per unit. The contribution margin is the selling price minus the variable cost, which is $9 - $3.60 = $5.40 per unit.
Now we can calculate the break-even point in units using the formula: Break-even point (in units) = Fixed costs / Contribution margin per unit.
In this case, the fixed costs are $50,000. Let's plug in the values:
Break-even point (in units) = $50,000 / $5.40 = 9,259 units.
So, the correct answer is option d) break-even production 9,259 units; break-even revenue $83,331.