Question

Marchete Company produces a single product. They have recently received the results of a market survey that indicates that they can increase the retail price of their product by 10% without losing customers or market share. All other costs will remain unchanged. Their most recent CVP analysis is presented below. Current Units sold 1,000 Sales Price per Unit $140 Variable Cost per Unit $97 Contribution Margin per Unit $43 Fixed Costs $36,464 Break-Even (in units) 848 Break-Even (in dollars) $118,720 Sales $140,000 Variable Costs $97,000 Contribution Margin $43,000 Fixed Costs $36,464 Net Income (loss) $6,536 If they enact the 10% price increase, what will be their new break-even point in units and dollars

Answer 1

The new breakeven point = 640 units

New breakeven point in dollars = $98,560

Step-by-step explanation:

if price increases by 105 from $140 to $154, their contribution margin will increase from $43 to $57 per unit (assuming all costs remain the same).

The new breakeven point = $36,464 / $57 = 639.72 ≈ 640 units (round up)

New breakeven point in dollars = 640 x $154 = $98,560