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Contribution margin per unit = 20 - 15 = 5

Breakeven point = 80000 / 5 = 16000 units

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Q: Gateway Appliance toasters sell for 20 per unit and the variable cost to produce them is 15 Gateway estimates that fixed costs are 80000 Compute the break-even point in units?
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1. Breakeven point = fixed cost/ contribution margin ratio contribution margin ratio: (sales - variable cost)/sales Sales = 20000 * 40 = 800000 Less: Variable cost = 20000 * 10 = 200000 Contribution margin = 600000 Contribution margin ratio = 600000/800000 = .75 Breakeven point in dollars = 120000/.75 = $160000 breakeven point in units = 160000 / 40 = 4000


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