Question
In: Accounting
Break-Even Sales Currently, the unit selling price of a product is $380, the unit variable cost...
Break-Even Sales
Currently, the unit selling price of a product is $380, the unit variable cost is $310, and the total fixed costs are $1,001,000. A proposal is being evaluated to increase the unit selling price to $420.
a. Compute the current break-even sales
(units).
units
b. Compute the anticipated break-even sales
(units), assuming that the unit selling price is increased and all
costs remain constant.
units
Solutions
Expert Solution
Requirement a
Current break-even point = 14,300 Units
Working
| A | Sales price per unit | $ 380.00 |
| B | Variable cost per unit | $ 310.00 |
| C=A-B | Contribution margin per unit | $ 70.00 |
| D | Fixed cost | $ 1,001,000.00 |
| E=D/C | Break-even in units | 14,300 |
Requirement b
New break even = 9,100 Units
Working
| A | Sales price per unit | $ 420.00 |
| B | Variable cost per unit | $ 310.00 |
| C=A-B | Contribution margin per unit | $ 110.00 |
| D | Fixed cost | $ 1,001,000.00 |
| E=D/C | New break even units | 9,100 |
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