<p>I am kind of stuck. I don\'t really remember my algebra so I could use some h

Question

<p>I am kind of stuck. I don't really remember my algebra so I could use some help<br /><br />Here is the formula that I am having trouble with<br /><br />widgets sold $.70(sales) = $10,000 (Fixed Costs) + $.30 (Variable Costs)<br />$.40 = $10,000<br />X = 25,000 units<br /><br />How did they get $.40 cents?<br /><br />I do not get this. I could really use some help. This is for managerial accounting which I am struggling with.</p>

Explanation / Answer

$0.40 is the contribution per unit, which is sale price less variable cost. In this question sale price is $0.70 and variable cost is $0.30. Hence contribution per unit is $0.40. To get the Breakeven point = x X = Fixed cost ÷ contribution per unit (sale price per unit – Variable cost per unit) = $10,000 ÷ ($0.70 - $0.30) = $10,000 ÷ $.40 = 25,000 units

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