Hess, Inc. sells a single product with a contribution margin of $12 per unit and fixed costs of $74,400 and sales for the current year of $100,000. How much is Hess’s break even point?
12 x - 74400 = 0
BEP = 6,200 units
To find the break-even point, we need to determine the number of units that need to be sold in order to cover the fixed costs.
The contribution margin per unit is $12. This means that for every unit sold, $12 contributes towards covering the fixed costs.
The fixed costs are $74,400.
To calculate the break-even point, divide the fixed costs by the contribution margin per unit:
Break-even point = Fixed costs / Contribution margin per unit
= $74,400 / $12
Calculating this, we find:
Break-even point = 6200 units
Therefore, Hess's break-even point is 6,200 units.
To find Hess Inc.'s break-even point, we need to determine the number of units they need to sell in order to cover their fixed costs. This can be calculated using the formula:
Break-even point (in units) = Fixed costs / Contribution margin per unit
Let's calculate it step by step.
Step 1: Identify the given information:
- Contribution margin per unit: $12
- Fixed costs: $74,400
- Sales for the current year: $100,000
Step 2: Calculate the break-even point using the formula:
Break-even point (in units) = Fixed costs / Contribution margin per unit
Break-even point (in units) = $74,400 / $12
Break-even point (in units) = 6,200 units
Therefore, the break-even point for Hess Inc. is 6,200 units. This means that they need to sell 6,200 units of their product in order to cover their fixed costs and achieve a break-even point.