Question

A product has a contribution margin of $8 per unit and a selling price of $45 per unit. Fixed costs are $26,000. Assuming new technology increases the unit contribution margin by 40 percent but increases total fixed costs by $18,800, what is the new breakeven point in units? (Do not round intermediate calculations.) Multiple Choice 3,250 units 5,000 units 4,680 units 4,000 units

Answer 1

New break even in units is 4000 units

Step-by-step explanation:

The break even point in units is the number of units that must be sold to earn enough total revenue to cover total costs. This is the point where there will be no profit and no loss. The formula for break even in units is,

Break even in units = Fixed costs / Contribution margin per unit

The new contribution margin per unit = 8 * 140% = $11.2

New Fixed costs = 26000 + 18800 = $44800

New Break even in units = 44800 / 11.2 = 4000 units