Question

Reynold's Grocery has fixed costs of $326,000, the unit selling price is $23, and the unit variable costs are $19. What are the break-even sales in units (rounded to a whole number) if the variable costs are decreased by $4?

a. 40,750 units
b. 81,500 units
c. 17,158 units
d. 21,733 units

Answer 1

The correct break-even sales in units for Reynold's Grocery, after the decrease in variable costs by $4, is calculated to be a. 40,750 units. So, the correct option is a. 40,750 units.

Step-by-step explanation:

The original break-even sales in units formula for Reynold's Grocery is calculated using the fixed costs ($326,000), the unit selling price ($23), and the unit variable costs ($19). To calculate the break-even point in units, we use the formula:

Break-even units = Fixed Costs / (Unit Selling Price - Unit Variable Costs)

With a decrease in variable costs by $4, the new variable cost is $19 - $4 = $15. Now, we can calculate the new break-even point:

Break-even units = $326,000 / ($23 - $15)

Break-even units = $326,000 / $8

Break-even units = 40,750 units (rounded to the nearest whole number)

Thus, the correct option in the final part of the question is a. 40,750 units.