Question

Break-Even Sales

Currently, the unit selling price of a product is $260, the unit variable cost is $210, and the total fixed costs are $640,000. A proposal is being evaluated to increase the unit selling price to $290.

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

Answer 1

Correct Answer:

Requirement 1:

A	sales price	$               260.00
B	Less: Variable costs	$               210.00
C =A-B	Contribution margin	$                 50.00
D	Fixed costs	$       640,000.00
E = D/C	Break-even point (Units)	12800 Units

Requirement 2:

A	sales price	$               290.00
B	Less: Variable costs	$               210.00
C =A-B	Contribution margin	$                 80.00
D	Fixed costs	$       640,000.00
E = D/C	Break-even point (Units)	8000 Units

End of answer.

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