Question

arnam Company currently produces and sells 26,000 units of a product that has a contribution margin of $9 per unit. The company sells the product for a sales price of $24 per unit. Fixed costs are $48,600. The company has recently invested in new technology and expects the variable cost per unit to fall to $14 per unit. The investment is expected to increase fixed costs by $18,900. After the new investment is made, how many units must be sold to break-even? (Do not round intermediate calculations.)

Answer 1

BEP units 6,750

It needs to sale 6,750 to break-even

Step-by-step explanation:

First, we calculate the new contribution margin:

`Sales \: Revenue - Variable \: Cost = Contribution \: Margin`

sales price 24

new variable cost 14

contribution margin 10

Then we proceed with the BEP in units

`(Fixed\:Cost)/(Contribution \:Margin) = Break\: Even\: Point_(units)`

fixed cost 48,600 + 18,900 = 67,500

contribution margin 10

`(67,500)/(10) = Break\: Even\: Point_(units)`

BEP units 6,750