Break-even formula reveals fixed costs

Steps:

• Compute contribution margin per unit: $10 selling price -$4 variable cost = $6.
• Apply break-even formula: Break-even units = fixed costs ÷ contribution margin per unit.
• Solve for fixed costs: $90,000 = 15,000 units ×$6.
• Note: Budgeted sales volume of 20,000 units is unused for this calculation.

Why D is correct:

• Break-even point equals fixed costs divided by contribution margin per unit, so fixed costs = 15,000 × ($10 -$4) = $90,000.

Why the others are wrong:

• A. $20,000: Matches budgeted sales volume in units, ignoring costs.
• B. $30,000: Understates by using half the break-even units or wrong margin.
• C. $60,000: Equals total revenue at break-even (15,000 ×$4), confusing with variable costs.

Final answer: D