How is break-even quantity calculated?

Prepare for ASU's MKT300 Exam 4 with engaging questions. Utilize flashcards and multiple-choice formats with helpful hints and explanations. Ace your exam!

The calculation of break-even quantity is crucial for understanding how many units of a product must be sold to cover all costs, without making a profit or incurring a loss. The correct approach is to determine how the fixed costs relate to the contribution margin per unit, which is the selling price minus the variable cost.

When calculating break-even quantity, you take the total fixed costs and then divide that by the contribution margin per unit. The contribution margin is the difference between the selling price and the variable cost associated with producing that unit. Thus, the formula expressed in the correct answer succinctly captures this relationship.

This method clearly shows how many units need to be sold for a business to reach a point where revenues equal total costs, providing a foundational understanding for financial planning and decision-making. The other options do not correctly represent the necessary relationship to arrive at the break-even quantity, focusing either on different cost measures or omitting the critical contribution margin aspect.

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