Question

Beasley Company currently sells its products for $ 20 per unit. Management is contemplating a 10​% increase in the selling price for the next year. Variable costs are currently 30​% of sales revenue and are not expected to change in dollar amount on a per unit basis next year​ (the company will pay the same amount for variable costs next​ year). Fixed expenses are $ 56 comma 000 per year. What is the breakeven point in units at the anticipated selling price per unit next​ year?

Answer 1

$ 3,500 units

Step-by-step explanation:

Selling price per unit (next year):

= $20 + 10 % of $20

= $22

Variable cost per unit (next year):

= $20 × 30 %

= $6

Contribution per unit (next year):

= Selling price per unit (next year) - Variable cost per unit (next year).

= $22 - $6

= $16

Fixed expenses = $56,000

Break even point (in units):

= Fixed expenses ÷ Contribution per unit.

= $56,000 ÷ 16

= $ 3,500 units