Currently, the unit selling price of a product is $7,520, the unit variable cost is $4,400,...

Currently, the unit selling price of a product is $7,520, the unit variable cost is $4,400, and the total fixed costs are $23,400,000. A proposal is being evaluated to increase the unit selling price to $8,000.

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=7500 Units

Working

A	Sale price	$ 7,520.00
B	variable expense	$ 4,400.00
C=A-B	Contribution margin	$ 3,120.00
D	Fixed expenses plus desired profit	$ 23,400,000.00
E=D/C	Break Even point in Unit Sale [Answer a]	7500.00

Requirement b

New break even point = 6500 units

Working

A	Sale price	$ 8,000.00
B	variable expense	$ 4,400.00
C=A-B	Contribution margin	$ 3,600.00
D	Fixed expenses plus desired profit	$ 23,400,000.00
E=D/C	Break Even point in Unit Sale [Answer b]	6500.00

ekkarill92 answered 1 year ago

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