Barnam Company currently produces and sells 12,000 units of a product that has a contribution margin...

Barnam Company currently produces and sells 12,000 units of a product that has a contribution margin of $8 per unit. The company sells the product for a sales price of $20 per unit. Fixed costs are $37,800. The company has recently invested in new technology and expects the variable cost per unit to fall to $12 per unit. The investment is expected to increase fixed costs by $20,000. After the new investment is made, how many units must be sold to break-even? (Do not round intermediate calculations.)

Expert Solution


CALCULATION OF CONTRIBUTION MARGIN PER UNIT

PARTICULARS	AMOUNT
Selling Price Per Unit=	$ 20
Less: Variable Cost Per Unit	$ 12
Contribution Margin Per Unit	$ 8
Contribution Margin %	40%
($ 8 / $ 20 X 100)


CALCULATION OF THE BREAK EVEN POINT IN UNITS

Revise Fixed Cost = $ 37,800 + $ 20,000 =	$ 57,800

Break Even point = Fixed Cost / Contribution Margin Per Unit
Break Even point =
Fixed Cost =	$ 57,800
Divide By	"/" By
Contribution Margin Per Unit =	$ 8
Break Even point =	7225	Units

Answer = 7,225 Units

ekkarill92 answered 1 year ago

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