Question

If fixed costs are $500,000, the unit selling price is $55, and the unit variable costs are $30, what are the break-even sales (units) if fixed costs are increased by $ 100,000? a. 24,000 units b. 10,545 units c. 23,200 units

d. 19,333 units

Answer 1

The break-even sales quantity can be calculated by dividing the fixed costs by the difference between the selling price per unit and the variable cost per unit. The new break-even sales quantity can be found by adding the increase in fixed costs to the original break-even sales quantity.

Step-by-step explanation:

To calculate the break-even sales quantity, we need to determine the number of units at which the total revenue equals the total cost. The formula for break-even point is:

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

Substituting the values from the question, we get: Break-even sales (units) = $600,000 / ($55 - $30) = 20,000 units.

Since the fixed costs have increased by $100,000, the new break-even sales (units) would be:

Break-even sales (units) = ($600,000 + $100,000) / ($55 - $30) = 24,000 units. Therefore, the correct answer is a. 24,000 units.