In: Accounting
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
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 |