Business Degree Certification Practice Test

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Business Degree Certification Test with our comprehensive quiz featuring flashcards and multiple choice questions, complete with hints and explanations. Ace your exam with confidence!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is the break-even volume for a product if fixed costs are $50,000, variable costs are $25.00, and the selling price is $35.00?

50,000 units
5,000 units
2,500 units
500 units

The correct answer is: 5,000 units

To determine the break-even volume, we need to calculate how many units must be sold to cover both fixed and variable costs. First, we identify the contribution margin per unit, which is the selling price minus the variable cost per unit. In this scenario, the selling price is $35.00, and the variable costs are $25.00. The contribution margin is calculated as follows: Contribution Margin = Selling Price - Variable Cost Contribution Margin = $35.00 - $25.00 Contribution Margin = $10.00 Next, we need to find out how many units need to be sold to cover the total fixed costs. This is done by dividing the total fixed costs by the contribution margin per unit. Break-even Volume = Fixed Costs / Contribution Margin Break-even Volume = $50,000 / $10.00 Break-even Volume = 5,000 units Thus, the break-even volume is 5,000 units, indicating that this is the number of units needed to be sold to cover the fixed costs and begin generating profit.