Question

A product sells for $30 per unit and has variable costs of $15.50 per unit. The fixed costs are $1,015,000. If the variable costs per unit were to decrease to $14.60 per unit, fixed costs increase to $1,078,000, and the selling price does not change, break-even point in units would:

Answer 1

The break-even point in units can be calculated using the formula: Break-even point = Fixed costs / (Selling price per unit - Variable costs per unit). Given the values, the initial break-even point is 67,000 units. If the variable costs decrease and the fixed costs increase, the new break-even point is 60,100 units.

Step-by-step explanation:

The break-even point can be calculated using the formula:

Break-even point (in units) = Fixed costs / (Selling price per unit - Variable costs per unit)

Using the given information, the break-even point in units can be calculated as:

Break-even point = $1,015,000 / ($30 - $15.50) = 67,000 units

If the variable costs per unit decrease to $14.60 and the fixed costs increase to $1,078,000, the new break-even point in units can be calculated as:

Break-even point = $1,078,000 / ($30 - $14.60) = 60,100 units

Answer 2

70,000 units

Step-by-step explanation:

Selling price per unit = $30

Variable cost per unit = $14.60

Contribution margin per unit = $30 - $14.60 = $15.40

Fixed cost = $1,078,000

Break-even point in units = Fixed cost ÷ Contribution margin per unit = $1,078,000 ÷ $15.40 = 70,000 units

Therefore, break-even point in units would 70,000 units.