If Fixed Costs Are $400,000 and the Unit Contribution Margin

question 155

Multiple Choice

If fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit?

• A) 25,000 units
• B) 10,000 units
• C) 400,000 units
• D) 20,000 units

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Definitions:

Unit Product Cost

The total cost to produce a single unit, including direct materials, direct labor, and allocated overhead.

Variable Costing

An accounting approach that includes only variable costs—direct materials, direct labor, and variable manufacturing overhead—in product costs, excluding fixed manufacturing overhead.

Unit Product Cost

The calculated cost of producing a single unit of product, which includes both fixed and variable costs.

Total Period Cost

The entire sum of expenses incurred by a business during a specific period, including both fixed and variable costs.