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Break-Even Sales Currently, the unit selling price of a product is $290, the unit variable cost...

Break-Even Sales

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.

a. Compute the current break-even sales (units).
units

b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.
units

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Answer #1

Computation of Break even points in units:

Break even points = Fixed cost / Contribution margin per unit

Contribution margin per unit = Sale price - Variable cost per unit

a.

Contribution margin per unit = $290 - $240 = $50

Break even points = $765000 / $50 = 15300 Units

b.

Contribution margin = $330 - $240 = $90

Anticipated Break even points = $765000 / $90 = 8500 units.

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