Question

In 2016, Hudson Corp. sold 3,000 units at $150.00 each. Variable expenses were $113.00 per unit, and fixed expenses were $58,240. The same variable expenses per unit and fixed expenses are expected for 2017. If the company cuts selling price by 6.00%, what is its break-even point in units for 2017?

Answer 1

Break even in units (2017) = 2080 units

Step-by-step explanation:

The break even point in units is the number of units where the total revenue equals total cost. It is a point of no profit and no loss. The break even point in units is calculated as follows,

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

Contribution margin per unit = Selling price per unit - Variable cost per unit

A cut in selling price of 6% would mean that the new selling price will be,

New selling price = 150 - (150 * 0.06) = $141

Contribution margin per unit = 141 - 113 = $28

Break even in units = 58240 / 28

Break even in units (2017) = 2080 units