What is the formula used to calculate the break-even point in units?

The break-even point in units is a critical concept in business that indicates the number of units that must be sold to cover all fixed and variable costs, resulting in neither profit nor loss. The correct formula to calculate the break-even point in units is derived from understanding the relationship between fixed costs, selling price, and variable costs.

To calculate the break-even point, you start with the fixed costs, which are costs that do not change with the level of output. Then, you need to determine the contribution margin per unit, which is the selling price minus the variable costs. The contribution margin indicates how much each unit sold contributes to covering the fixed costs.

Thus, the formula for the break-even point in units is:

Break-even Point (units) = Fixed Costs / (Selling Price - Variable Costs)

This means that to find the number of units that need to be sold to break even, you divide the total fixed costs by the contribution margin per unit. Using this formula, a business can quantify how many units it must sell to ensure that total revenues equal total costs.

The other options mentioned do not reflect this relationship appropriately. For instance, the formulas that include addition or multiplication in ways inconsistent with the method for determining the contribution margin misrepresent the