Determine the (a) break-even point in sales units and (b) break-even point in sales units assuming that the selling price is increased to $67 per unit

Nicolas Enterprises sells a product for $60 per unit. The variable cost is $35 per unit, while fixed costs are $80,000. Determine the (a) break-even point in sales units and (b) break-even point in sales units assuming that the selling price is increased to $67 per unit

Solutions

Expert Solution

For Nicolas Enterprises, we can apply the following calculation to find the break-even threshold in sales units:

Break-Even Point (in units) = Fixed Costs / Unit Contribution Margin

Given: Variable cost per unit: $35 Fixed costs: $80,000

(a) Break-Even Point in Sales Units: Unit Contribution Margin = Selling Price per Unit - Variable Cost per Unit = $60 - $35 = $25

Break-Even Point (in units) = $80,000 / $25 = 3200 units

Therefore, the break-even point in sales units for Nicolas Enterprises is 3200 units

(b) Break-Even Point in Sales Units with Increased Selling Price: Given the increased selling price of $67 per unit, we need to recalculate the unit contribution margin.

Unit Contribution Margin = Selling Price per Unit - Variable Cost per Unit = $67 - $35 = $32

Break-Even Point (in units) = $80,000 / $32 = 2500 units

Therefore, assuming the selling price is increased to $67 per unit, the break-even point in sales units for Nicolas Enterprises would be 2500 units.

balaji rao answered 9 months ago

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