Question

Currently, the unit selling price of a product is $290, the unit variable cost is $240, and the total fixed costs are $765,000. A proposal is being evaluated to increase the unit selling price to $330.
Required:
a. Compute the current break-even sales (units).
b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased to the proposed $330, and all costs remain constant.

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Selling price= $290

Unitary variable cost= $240

The total fixed costs= $765,000.

A proposal is being evaluated to increase the unit selling price to $330.

First, we need to calculate the break-even point in units using the original selling price. We need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 765,000 / (290 - 240)

Break-even point in units= 15,300 units

Now, with a selling price of $330.

Break-even point in units= 765,000/ (330 - 240)

Break-even point in units= 8,500 units