Question

Sheffield Corp. sells radios for $50 per unit. The fixed costs are $565000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $215000 and variable costs will be 50% of the selling price. The new break-even point in units is:

Answer 1

The new break-even point in units is 31,200 units

Step-by-step explanation:

The formula to compute break even point in units is shown below:

= Fixed cost ÷ Contribution per unit

where,

New Fixed cost = $565000 + $215000 = $780,000

And, contribution per unit is equals to

= Selling price per unit - variable cost per unit

= $50 - ($50 × 50%)

= $50 - $25

=$25 per unit

Now, put these values to the above formula

So, new break even point in units is equals to

= $780,000 ÷ $25 per unit

= 31,200 units

Thus, The new break-even point in units is 31,200 units