Break-Even Sales Currently, the unit selling price of a product is $210, the uni
ID: 2563078 • Letter: B
Question
Break-Even Sales
Currently, the unit selling price of a product is $210, the unit Costs that vary in total dollar amount as the level of activity changes.variable cost is $170, and the total Costs that tend to remain the same in amount, regardless of variations in the level of activity.fixed costs are $336,000. A proposal is being evaluated to increase the unit selling price to $230.
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
Explanation / Answer
Req A.
Current selling price = $210per unit
Variable cost per unit $ 170 per unit
Contribution per unit (selling price - variable cost ) ( 210-170 ) = $40 per unit
Fixed cost = $ 336,000
Current break even sales in units = Total fixed cost / contribution per unit
= 336,000 /40 = 8,400 units
ReqB.
Revised selling price = $ 230 per unit
Variable cost per unit = $ 170 per unit
Contribution per unit (230 -170 ) = $ 160 per unit
Fixed cost = $ 336,000
Anticipated Break even sales in units = Fixed cost / Contribution per unit
= 336,000 / 60 = 5,600 units
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