The following information is available for the 20,000 units of X Company\'s one
ID: 2424770 • Letter: T
Question
The following information is available for the 20,000 units of X Company's one product sold in 2015:
Selling price
$51.00
Variable costs per unit
$25.00
Total fixed costs
$540,000
In 2016, X Company expects sales to increase to 25,000 units, but it is uncertain what variable costs per unit will be. What must variable costs per unit be in order for X Company to breakeven in 2016?
Selling price
$51.00
Variable costs per unit
$25.00
Total fixed costs
$540,000
Explanation / Answer
Break even point is the point where contribution equals fixed cost
hence contribution will be $540,000
Per unit contribution $540,000/ 45,000 units = $12
hence variable cost should be = $51 selling price - $12 contribution pe unit
= $39
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