Sunn Company manufactures a single product that sells for $180 per unit and whose variable costs are $135 per unit. The company’s annual fixed costs are $562,500.

 Sunn Company manufactures a single product that sells for $180 per unit and whose variable costs are $135 per unit. The company’s annual fixed costs are $562,500.



Explanation
(a) Contribution margin per unit = $180 − $135 = $45 per unit
(b) Contribution margin ratio = $45 / $180 = 25%
(c) Break-even point in units = $562,500 / $45 = 12,500 units
(d) Break-even point in dollars = $562,500 / 25% = $2,250,000

(Alternatively: 12,500 units × $180 = $2,250,000)