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If fixed costs are $281,000, the unit selling price is $33, and the unit variable costs are $21, the break-even sales (units) if fixed costs are reduced by $38,400 is

a.16,173 units
b.20,217 units
c.24,260 units
d.30,325 units

Answer 1

The correct answer is option b which is the break-even quantity will be 20217 units.

What is the break-even point?

The point at which the company will not have any profit and loss on the products they manufactured they only get the amount they invested in manufacturing the product is called the break-even point.

Given that:-

If fixed costs are $281,000, the unit selling price is $33, and the unit variable costs are $21, the break-even sales (units) if fixed costs are reduced by $38,400.

The formula for calculating break-even quantity will be given as:-

$BEQ = \dfrac{FC}{SP-VC}$

Here,

FC = Fixed cost = $281000

SP = Selling price = $33

VC = Variable cost = $21

The fixed cost is reduced by $38400 so the fixed cost now:-

FC = $281000 - $38400

FC = $242600

$BEQ = \dfrac{242600}{33-21}$

BEQ = 20217 units

Therefore the correct answer is option b which is the break-even quantity will be 20217 units.

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