Question

Lighfoot Company sells its product for $55 and has variable costs of $30 per unit. Total fixed costs are $25,000. Suppose variable costs increase by 10% due to an increase in the cost of direct materials. The breakeven point will a. increase from 1,000 units to 1,136 units b. decrease form 1,000 units to 864 units c. increase from 758 units to 1,000 units d. decrease from 1,000 units to 758 unit

Answer 1

The break-even point for Lightfoot Company will a. increase from 1,000 units to 1,136 units.

What is the break-even point?

The break-even point shows the sales units or sales revenue needed so that the entity does not earn a profit or incur a loss.

At break-even point, there is not profit or loss because the total costs (fixed and variable) equal to the sales revenue.

Data and Calculations:

Selling price per unit = $55

Variable costs per unit = $30

Contribution margin per unit = $25 ($55 - $30)

Fixed costs = $25,000

Increase in variable costs per unit = 10%

New Variable costs per unit = $33 ($30 x 1.1)

New Contribution margin per unit = $22 ($55 - $33)

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

Old break-even point in units = 1,000 units ($25,000/$25)

New break-even point in units = 1,136 units ($25,000/$22)

Thus, the break-even point for Lightfoot Company will a. increase from 1,000 units to 1,136 units.

Learn more about the break-even analysis at https://brainly.com/question/21137380

#SPJ12