How is break-even price for a crop enterprise computed?

• A. Fixed costs divided by (price per unit minus variable cost per unit).
• B. Variable costs divided by price.
• C. Fixed costs times price.
• D. Price minus costs.

Answer: (A)

Breaking even happens when revenue just covers all costs, so what matters is how much each unit contributes to fixed costs. That contribution per unit is the price minus the variable cost per unit. To know how many units must be sold to cover fixed costs, you divide the fixed costs by this per-unit contribution: FC ÷ (P − VC). This gives the break-even quantity—the number of units you must sell at price P to cover all costs. If you instead want the break-even price for a fixed planned output, you’d rearrange to P* = VC + FC/Q. The key idea is that fixed costs must be recovered by the aggregate contribution from unit sales, which is why the ratio FC divided by (P − VC) is the standard expression.