Question

Company had fixed costs of $6,708,000, a unit variable cost of $444, and a unit selling price of $600. For the coming year, no changes are expected in revenues and costs, except that a new wage contract will increase variable costs by $6 per unit. Determine the break-even sales (units) for (a) the past year and (b) the coming year

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Fixed costs= $6,708,000

Unit variable cost= $444

Unit selling price= $600.

To calculate the break-even point in units, we need to use the following formula:

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

Year 1:

Break-even point in units= 6,708,000 / (600 - 444)

Break-even point in units= 43,000 units

Year 2:

Break-even point in units= 6,708,000 / (600 - 450)

Break-even point in units= 44,720 units