1) 2) If fixed costs are $450,000, the unit selling price is $75, and the unit...

Question

Question

1)

2)

business accounting

Answer 1

Answer #1

Solution 1:

Unit selling price = $75

Unit variable cost = $50

Contribution margin per unit = Selling price per unit - Variable cost per unit = $75 - $50 = $25 per unit

Fixed cost = $450,000

Old Break even Point = Fixed cost / contribution margin per unit = $450,000 / $25 = 18000 units

If unit selling price increase by $10 per unit, contribution margin per unit = $25 + $10 = $35 per unit

New break even point = $450,000 / $35 = 12857 units

Hence option a is correct.

Solution 2:

If sales expected to increase by 12% then operating income expected to increase by = % increase in sales * operating leverage

= 12%*4 = 48%

Hence option d is correct.

Answer 2

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