Breakeven point in units: If fixed costs are 60,000 and contribution per unit is 12, how many units are required to breakeven?

Breakeven point in units: If fixed costs are 60,000 and contribution per unit is 12, how many units are required to breakeven?

• A. 6,000
• B. 4,000
• C. 5,000
• D. 3,000

Answer: (C)

Breakeven in units is reached when the contribution from sales just covers fixed costs. The formula is fixed costs divided by contribution per unit. Here, fixed costs are 60,000 and each unit adds 12 to contribution, so the breakeven quantity is 60,000 ÷ 12 = 5,000 units. At 5,000 units, total contribution is 5,000 × 12 = 60,000, which exactly covers the fixed costs, leaving zero profit. Producing more than this would generate a profit, while fewer would incur a loss.

Breakeven in units is reached when the contribution from sales just covers fixed costs. The formula is fixed costs divided by contribution per unit. Here, fixed costs are 60,000 and each unit adds 12 to contribution, so the breakeven quantity is 60,000 ÷ 12 = 5,000 units. At 5,000 units, total contribution is 5,000 × 12 = 60,000, which exactly covers the fixed costs, leaving zero profit. Producing more than this would generate a profit, while fewer would incur a loss.