Question

Adams Company produces a product that sells for $33 per unit and has a variable cost of $13 per unit. Adams incurs annual fixed costs of $120,000. RequiredDetermine the sales volume in units and dollars required to break even. (Do not round intermediate calculations.)Calculate the break-even point assuming fixed costs increase to $192,000. (Do not round intermediate calculations.)

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Adams Company produces a product that sells for $33 per unit and has a variable cost of $13 per unit. Adams incurs annual fixed costs of $120,000.

To calculate the break-even point both in dollars and units, we need to use the following formulas:

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

Break-even point in units= 120,000/ (33 - 13)

Break-even point in units= 6,000 units

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 120,000/ (20/33)

Break-even point (dollars)= $198,000

Now, for fixed costs= 192,000

Break-even point in units= 192,000/ (33 - 13)= 9,600 units

Break-even point (dollars)= 192,000/ (20/33)= $316,800