Question

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.)

Answer 1

	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