Question

Break-Even Sales Currently, the unit selling price of a product is $370, the unit variable cost is $300, and the total fixed costs are $1,001,000. A proposal is being evaluated to increase the unit selling price to $410. 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

Answer 1

a. 14,300 units

b. 9,100 units

Step-by-step explanation:

a. For computation of current break-even sales (units) first we will find out the contribution margin per unit which is shown below:-

Contribution margin per unit = Selling price per unit - Variable cost

= $370 - $300

= $70

Current break-even sales (units) = Fixed cost ÷ Contribution margin per unit

= $1,001,000 ÷ $70

= 14,300 units

b. For computation of anticipated break-even sales (units) first we will find out the contribution margin per unit which is shown below:-

Contribution margin per unit = Selling price per unit - Variable cost

= $410 - $300

= $110

Anticipated break-even sales (units) = Fixed cost ÷ Contribution margin per unit

= $1,001,000 ÷ $110

= 9,100 units

So, we have applied the above formula.