Break-Even Point Formula in Units

Steps:

• Identify total fixed costs (FC), which remain constant regardless of production.
• Calculate contribution margin per unit (CM) as selling price per unit (SP) minus variable cost per unit (VC).
• Divide FC by CM to determine the number of units needed to cover all costs.
• This yields the break-even point in units, where total revenue equals total costs.

Why A is correct:

• It matches the standard formula BE = FC / (SP - VC), ensuring fixed costs are covered by the contribution margin.

Why the others are wrong:

• B calculates only the contribution margin per unit, not the full break-even quantity.
• C subtracts variable cost from fixed costs, yielding a nonsensical value unrelated to units.
• D mixes sales, fixed costs, and contribution, resembling a profit calculation rather than break-even.

Final answer: A