Question

Nicolas Enterprises sells a product for $67 per unit. The variable cost is $33 per unit, while fixed costs are $231,200. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $73 per unit.

Answer 1

a)Break-even point = 6,800 units

b) Break-even point =5780 units

Step-by-step explanation:

Break-even point is the level of activity that achieves no profit or loss. At this level profit is zero because the the total revenue is equal to total cost.

The break-even point is calculated as

Units to achieve target profit = (Total general fixed cost for the period)/ contribution per unit

Contribution per unit = Selling Price - Variable cost

Contribution per unit = 67 - 33 = 34

Fixed cost =231,200

So the units requited to achieve break-even point:

Break-even point = 231,200/34 = 6,800 units

Break-even point = 6,800 units

b) If the selling price wete increased to 73

The break-even point = 231,200/ (73- 33) = 5,780 units

Break-even point =5780 units