What is the correct formula for breakeven point in units?

What is the correct formula for breakeven point in units?

• A. (Selling Price - Variable Costs) ÷ Fixed Costs
• B. Total Costs ÷ (Selling Price - Variable Costs)
• C. Fixed Costs ÷ (Selling Price - Variable Costs)
• D. Fixed Costs ÷ Selling Price

Answer: (C)

Breakeven in units shows how many items must be sold to cover all costs. Each unit sold adds a contribution to fixed costs equal to the selling price minus the variable cost per unit. When you multiply that contribution by the number of units, you get the amount available to cover fixed costs. At the break-even point, the total contribution exactly equals the fixed costs. So the required number of units is fixed costs divided by the contribution per unit (selling price minus variable cost). For example, if fixed costs are 5,000, the selling price is 50 and the variable cost is 30, the contribution per unit is 20, so break-even in units is 5,000 ÷ 20 = 250 units. The other formulas don’t fit because they either mix units and money incorrectly, use total costs instead of fixed costs, or ignore variable costs altogether.

Breakeven in units shows how many items must be sold to cover all costs. Each unit sold adds a contribution to fixed costs equal to the selling price minus the variable cost per unit. When you multiply that contribution by the number of units, you get the amount available to cover fixed costs. At the break-even point, the total contribution exactly equals the fixed costs. So the required number of units is fixed costs divided by the contribution per unit (selling price minus variable cost).

For example, if fixed costs are 5,000, the selling price is 50 and the variable cost is 30, the contribution per unit is 20, so break-even in units is 5,000 ÷ 20 = 250 units.

The other formulas don’t fit because they either mix units and money incorrectly, use total costs instead of fixed costs, or ignore variable costs altogether.