Question

Hilton Inc. sells a product for $51 per unit. The variable cost is $27 per unit, while fixed costs are $71,424. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $58 per unit. a. Break-even point in sales units units b. Break-even point if the selling price were increased to $58 per unit

Answer 1

Answer and Explanation:

The computation is shown below:

As we know that

Break even point = (Fixed cost) ÷ (Contribution margin per unit)

where,

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

a. The break even point in sales units is

= ($71,424) ÷ ($51 - $27)

= ($71,424) ÷ ($24)

= 2,976 units

b. In case when the sale price increased to $58 per unit, the break even point is

= ($71,424) ÷ ($58 - $27)

= ($71,424) ÷ ($31)

= 2,304 units