Question

Gall Manufacturing sells a product for $50 per unit. The fixed costs are $840,000, and the variable costs are 60 percent of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $200,000 and variable costs will be 50 percent of the selling price. The new break-even point in units is

Answer 1

Answer:

41,600 units  

Explanation:

The computation of the break even point in unit is shown below:

As we know that

Break Even Point:

= Fixed Cost ÷ Contribution margin per unit

where,

Fixed Cost = $840,000 + $200,000

= $1,040,000

And,  

Variable cost per unit is

= 50% 0f selling price

= $50 × 50%

= $25

So, the break even point in units is

= $1,040,000 ÷ $25

= 41,600 units