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How to calculate Beak-Even in Units and Dollars

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RL Corp. sells its finished product for an average of $35 per unit with a variable cost per unit of $21. The company has fixed operating costs of $1,050,000.

a) Calculate the firm's operating breakeven point in units.
b) Calculate the firm's operating breakeven in dollars.
c) Using 100,000 units as a base, what is the firm's degree of operating leverage?

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Solution Summary

This solution shows you how calculate break-even in units and dollars. It also shows how to calculate a firm's degree of operating leverage.

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Hello Student,

In order to calculate the firm's break-even point in units, the formula that you would use is:

Break-Even (Units) = Total Fixed Costs / Contribution Margin,

Where Contribution Margin is given by:

Contribution Margin = Selling Price per Unit - Variable Costs per Unit

Hence, Break- Even (Units) = $1,050,000 / ( $35 - $21)

= $1,050,000 / $14

= 75,000 Units

In ...

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