Question

Supposed Abdullah decides to expand his business. His new fixed expenses will be $17,500 but the average cost for a pair of boots will fall to $65. He expects that the total revenue from selling 25 pairs of boots in the second month will still be $4,500. What is the new break-even point

Answer 1

Break-even point in units= 152 units

Step-by-step explanation:

Giving the following information:

Supposed Abdullah decides to expand his business. His new fixed expenses will be $17,500 but the average cost for a pair of boots will fall to $65. He expects that the total revenue from selling 25 pairs of boots in the second month will still be $4,500.

First, we need to calculate the selling price per unit:

Selling price per unit= 4,500/25= $180

Now, we can calculate the break-even point in units:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 17,500/ (180 - 65)

Break-even point in units= 152 units