Question

SBD Phone Company sells its waterproof phone case for $90 per unit. Fixed costs total $162,000, and variable costs are $36 per unit. How will the break-even point in units change in response to each of the following independent changes in selling price per unit, variable cost per unit, or total fixed costs? (It is not necessary to compute new break-even points.)

Change Break-Even in UNits will
1. Total fixed costs to $190,000 ________
2. Variable costs to $34 per unit _________
3. Selling price per unit to $80

Answer 1

1. Total fixed costs to $190,000 ________ Break Even Sales Volume in Units 316,666.67

2. Variable costs to $34 per unit _________ Break Even Sales Volume in Units = 260357. 14

3. Selling price per unit to $80 ----------Break Even Sales Volume in Units =254545.45

Step-by-step explanation:

SBD Phone Company

Without Changes

Break Even Sales Volume in Dollars= Fixed Costs/ 1- (variable Costs/ Sales)

Break Even Sales Volume in Units =$162,000/1- (36/ 90)

Break Even Sales Volume in Units =$162,000/1=0.4

Break Even Sales Volume in Units =$162,000/0.6

Break Even Sales Volume in Units =270000

1.When Total fixed costs are changed to $190,000

Break Even Sales Volume in Units =$190,000/0.6= 316,666.67

The increase in fixed costs shows an unfavorable increase in break even units

2. When Variable costs are changed to to $34 per unit

Break Even Sales Volume in Units =$162,000/1- (34/ 90)

Break Even Sales Volume in Units =$162,000/0.622

Break Even Sales Volume in Units = 260357. 14

The decrease in Variable costs shows a favorable decrease in break even units

3. When Selling price is changed to $80

Break Even Sales Volume in Units =$162,000/1- (36/ 80)

Break Even Sales Volume in Units =$162,000/0.55

Break Even Sales Volume in Units =254545.45

The decrease in Selling price shows a favorable decrease in break even units

Yes it is necessary to compute new break-even points because this is how we can see the changes in units and the effects of the changes.