Question

If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, the old and new break-even sales (units), respectively, if the unit selling price increases by $10 are a.18,000 units and 12,857 units b.6,000 units and 5,294 units c.18,000 units and 6,000 units d.9,000 units and 15,000 units

Answer 1

a.18,000 units and 12,857 units

Step-by-step explanation:

The computation is shown below:

As we know that

Break even in units = Fixed Cost ÷ Contribution margin per unit

where,

Fixed cost = $450,000

Contribution margin per unit

= Selling price per unit - variable cost per unit

= $75 - $50

= $25

So, the break even point in units is

= $450,000 ÷ $25

= 18,000 units

Now

The new break even sale in units is

= $450,000 ÷ ($85 - $50)

= $450,000 ÷ $35

= 12,857 units