Break-Even Quantity for Coiled Machine Tubing | CFA® Level 1 Exam Prep

Break-Even Quantity Calculation for Coiled Machine Tubing

Prev Question Next Question

Question

Clay Industries, a large industrial firm, is evaluating the sales of its existing line of coiled machine tubing. In their analysis, the operating managers of Clay

Industries have identified the following information related to the coiled machine tubing division and its product:

Annual fixed operating expenses of $925,000

Average selling price of $90 -

Average variable cost of $44 -

Which of the following best describes the break-even quantity for this product?

Answers

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D. E. F.

Explanation

To calculate the break-even quantity for a product, use the following equation: {Fixed operating costs/[avg. sales price per unit - variable cost per unit]}. The determination of the break-even quantity for this product is relatively straightforward, and does not involve any algebraic manipulation of the original equation.

Incorporating the given information into the equation yields the following: {$925,000/[$90 - $44]} = 20,109 units.

Prev Question Next Question