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Calculating break-even points and production cost

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Michael Vick has written a self-improvement book that has the following cost characteristics:

Selling Price: $16.00 per book
Variable cost per unit:
Production $4.00
Selling & administrative 2.00
Fixed costs:
Production $88,000 per year
Selling & administrative 18,000 per year

How many units must be sold to break-even?

Assume the variable production cost and the price were both cut by $2.00 per unit. Which of the following would change?

Contribution margin per unit

Break-even point in units

Total fixed costs

Contribution margin ratio

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Solution Summary

This solution shows how to calculate various financial characteristics for a product, in this case a self-improvement book written by Michael Vick.

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