Lex Company produces products that it sells for $10 each. Variable costs per unit are $4, and annual fixed costs are $120,000.Required:Use the equation method to determine the break-even point in units and dollars.
What will be an ideal response?
Selling price per unit × Number of units sold = Variable cost per unit × Number of units sold + Fixed costs
$10x = $4x + $120,000
where x = number of units sold
x = 20,000 = Break-even point in units
Break-even point in dollars = 20,000 × $10 = $200,000
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