US CMA Part 2 · Chapter 5 · Question 14 of 15
Walden Ceramics expects to sell 25,000 units next year. Variable cost is $22 per unit and fixed costs are $450,000. What is the minimum selling price per unit required to break even?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $40.00
Explanation
At breakeven, total revenue = total cost: 25,000 x P = $450,000 + (25,000 x $22). P = $22 + $450,000 / 25,000 = $22 + $18.00 = $40.00. Each unit must cover its variable cost and its share of fixed costs.
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