Break-even in units is calculated as Fixed Costs divided by which quantity?

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Multiple Choice

Break-even in units is calculated as Fixed Costs divided by which quantity?

Explanation:
Break-even in units comes from covering fixed costs with the contribution each unit makes after variable costs are paid. That per-unit contribution is price minus variable cost. So the break-even quantity is fixed costs divided by (price minus variable cost). This focuses on how much each sold unit adds toward fixed costs. Using just the price ignores fixed costs, and using total contribution margin would give a dollar amount rather than a unit count, so it doesn’t yield the unit break-even.

Break-even in units comes from covering fixed costs with the contribution each unit makes after variable costs are paid. That per-unit contribution is price minus variable cost. So the break-even quantity is fixed costs divided by (price minus variable cost). This focuses on how much each sold unit adds toward fixed costs. Using just the price ignores fixed costs, and using total contribution margin would give a dollar amount rather than a unit count, so it doesn’t yield the unit break-even.

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