Question

Jacob Inc. has fixed costs of $250,000, the unit selling price is $32, and the unit variable costs are $22. What are the old and new break-even sales (units) if the unt

selling price increases by $67
a. 7,500 units and 6,667 units
b. 20,000 units and 15,000 units c. 25,000 units and 15,625 units
d. 20,000 units and 30,000 units

Answer 1

Jacob Inc. has fixed costs of $250,000, the unit selling price is $32, and the unit variable costs are $22. The old and new break-even sales units are 25,000 units and 15,625 units respectively.

Step-by-step explanation:

To determine the old and new break-even sales units, we need to use the breakeven formula: Total Fixed Costs / (Selling Price per Unit - Variable Costs per Unit). The fixed costs of Jacob Inc. are $250,000, the unit selling price is $32, and the unit variable costs are $22.

Old Break-even Sales Units: $250,000 / ($32 - $22) = 25,000 units.

New Break-even Sales Units: $250,000 / ($32 + $67 - $22) = 15,625 units.

Therefore, the correct answer is c. 25,000 units and 15,625 units.