Question

Jacob Inc. has fixed costs of $250,000, the unit selling price is $32, and the unit variable costs are $22. What are the old and new break-even sales (units) if the unit

selling price increases by $67
a. 7,500 units and 6,667 units
b. 20,000 units and 15,000 units c. 25,000 units and 15,625 units
d. 20,000 units and 30,000 units

Answer 1

The original break-even point is 25,000 units. After increasing the unit selling price by $67, the new break-even point is 3,247 units. The provided options are incorrect, and we may need to revisit the question for accuracy.

Step-by-step explanation:

The subject question deals with the concept of break-even analysis in a business setting, particularly as it pertains to Jacob Inc. To find the break-even point in units, we use the formula:

Break-even point in units = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

The current break-even point with a selling price of $32 and variable costs of $22 is calculated as:

Break-even point = $250,000 / ($32 - $22) = $250,000 / $10 = 25,000 units

If the selling price increases by $67, the new selling price would be $32 + $67 = $99 per unit. The new break-even point would be:

New break-even point = $250,000 / ($99 - $22) = $250,000 / $77 = 3,247 units (rounded to the nearest whole unit)

The options provided do not match the calculations; thus, either the question has an error, or the provided answers are incorrect. We must review the question and options carefully to ensure accuracy.