Question

Break-Even Point Hilton Inc. sells a product for $118 per unit. The variable cost is $76 per unit, while fixed costs are $248,724. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $123 per unit. a. Break-even point in sales units units b. Break-even point if the selling price were increased to $123 per unit units

Answer 1

The break-even point in sales units is 5912 units. If the selling price were increased to $123 per unit, the break-even point would be 5286 units.

Step-by-step explanation:

To calculate the break-even point in sales units, we need to find the point where the total revenue equals the total cost. The formula to calculate the break-even point is: Break-even point (in units) = Fixed costs / Contribution margin per unit. In this case, the fixed costs are $248,724 and the contribution margin per unit is ($118 - $76) = $42. Therefore, the break-even point in sales units is $248,724 / $42 = 5912 units.

If the selling price were increased to $123 per unit, the new contribution margin per unit would be ($123 - $76) = $47. Using the same formula, the break-even point would be $248,724 / $47 = 5286 units.