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Break-Even Sales

Currently, the unit selling price of a product is $125, the unit variable cost is $105, and the total fixed costs are $460,000. A proposal is being evaluated to increase the unit selling price to $130.

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:

Instructions are listed below.

Explanation:

Giving the following information:

Currently, the unit selling price of a product is $125, the unit variable cost is $105, and the total fixed costs are $460,000. A proposal is being evaluated to increase the unit selling price to $130.

Break-even point= fixed costs/ contribution margin

A) Break-even point= 460,000/(125-105)= 23,000 units

B) Break-even point= 460,000/ (130 - 105)= 18,400 units

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