Question

Break-Even Point

Sheridan Enterprises sells a product for $101 per unit. The variable cost is $51 per unit, while fixed costs are $570,000.

Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $108 per unit.

a. Break-even point in sales units fill in the blank 1
units
b. Break-even point if the selling price were increased to $108 per unit fill in the blank 2
units

Answer 1

Step-by-step explanation:

a. To find the break-even point in sales units, we can use the formula:

Break-even point = Fixed costs / (Selling price per unit - Variable cost per unit)

Plugging in the given values, we get:

Break-even point = $570,000 / ($101 - $51) = $570,000 / $50 = 11,400 units

Therefore, the break-even point in sales units is 11,400 units.

b. If the selling price were increased to $108 per unit, the new contribution margin per unit would be:

Contribution margin per unit = Selling price per unit - Variable cost per unit = $108 - $51 = $57

Using the same formula as above, we can find the new break-even point in sales units:

Break-even point = $570,000 / ($108 - $51) = $570,000 / $57 = 10,000 units

Therefore, the break-even point if the selling price were increased to $108 per unit is 10,000 units.