For the past year, Iris Company had fixed costs of $6,708,000, a unit variable cost of...

For the past year, Iris Company had fixed costs of $6,708,000, a unit variable cost of $444, and a unit selling price of $600. For the coming year, no changes are expected in revenues and costs, except that a new wage contract will increase variable costs by $6 per unit. Determine the break-even sales (units) for (a) the past year and (b) the coming year.

Expert Solution

a.	Particulars	Amount in units
	Selling Price per unit	$600
	Less: Variable Cost	($444)
	Contribution Margin Per Unit	$156	($600-$444)

	Fixed Cost	$6,708,000

	Break Even Sales in Units	Fixed Cost/ Contribution Margin per unit

	Break Even Sales in Units	$6708000/$156
	Break Even Sales in Units for past year	$43,000


b.	Increase in Variable Cost	$ 6 per unit
	Revised Variable Cost	$444+$6
	Revised Variable Cost	$450


	Particulars	Amount in units
	Selling Price per unit	$600
	Less: Variable Cost	($450)
	Contribution Margin Per Unit	$150	($600-$444)

	Fixed Cost	$6,708,000

	Break Even Sales in Units	Fixed Cost/ Contribution Margin per unit

	Break Even Sales in Units	$6708000/$150
	Break Even Sales in Units for current year	$44,720

ekkarill92 answered 1 year ago

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For the past year, Iris Company had fixed costs of $6,708,000, a unit variable cost of...

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