Ace the AFP Exam 2026 – Boost Your Financial Wizardry!

To determine the break-even point for the manufacturer, you need to calculate how many units must be sold to cover both fixed and variable costs.

The formula to find the break-even point in units is given by:

Break-even point (in units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

In this case:

- Fixed Costs = $10,000

- Selling Price per Unit = $100

- Variable Cost per Unit = $60

First, calculate the contribution margin per unit:

Contribution Margin = Selling Price - Variable Cost

Contribution Margin = $100 - $60 = $40

Next, you can plug the values into the break-even formula:

Break-even point = $10,000 / $40

Break-even point = 250 units

The calculation shows that to reach the break-even point, the manufacturer needs to sell 250 units, which directly corresponds to the first answer option. This allows the manufacturer to cover fixed costs and any variable costs incurred with each unit sold, ensuring that sales equal total costs (zero profit).