A manufacturing process has a fixed cost of 150000 per month

A manufacturing process has a fixed cost of $150,000 per month. Each unit of product being produced contains $25 worth of material and takes $45 of labor. How many units are needed to break even if each completed unit has a value of $90?

Solution

For break even points(units)=fixed cost/unit contribution margin
= unit contribution margin=sales price(sp)-variable cost(vc)
=unit contribution margin=$90-($25+$45)
unit contribution margin=$90-$70
so we have unit contribution margin=$20
Breakeven Point=fixed cost/unit contribution margin
breakeven point=$150,000/$20
so,breakeven point=$7,500 units.