Based on the information given the break-even point is 11,923 units.
Using this formula
Break Even Point = Fixed Cost / (selling price per unit - Variable cost per unit)
Where:
Fixed Cost=$155,000
Selling price per unit=$26
Variable cost per unit=$13
Let plug in the formula
Break Even Point=155,000 / (26 - 13)
Break Even Point=155,000/13
Break Even Point= 11,923 units
Inconclusion the break-even point is 11,923 units.
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The break-even points for The Warren Watch Company can be computed as follows:
1. The break-even point in units = Fixed costs/Contribution margin per unit
= 11,923 units ($155,000/$13).
2. The break-even point in dollars = Fixed costs/Contribution margin ratio
= $310,000 ($155,000/50%).
Data and Calculatioins:
Fixed costs = $155,000
Selling price per unit = $26
Variable costs per unit = $13
Contribution margin per unit = $13 ($26 - $13)
Contribution margin ratio = 50% ($13/$26 x 100)
The break-even point in units = Fixed costs/Contribution margin per unit
= 11,923 units ($155,000/$13).
The break-even point in dollars = Fixed costs/Contribution margin ratio
= $310,000 ($155,000/50%).
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