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?
To calculate the break-even point, you need to determine the number of units Hess, Inc. needs to sell to cover all fixed costs. The formula for break-even point is:
Break-even point (in units) = Fixed costs / Contribution margin per unit
In this case, the contribution margin per unit is $12 and the fixed costs are $74,400. Plugging the values into the formula:
Break-even point (in units) = $74,400 / $12
Break-even point (in units) = 6,200 units
Therefore, Hess, Inc.'s break-even point is 6,200 units. This means that the company needs to sell at least 6,200 units to cover all fixed costs and start making a profit.