Question

Sequoah Company sells its product for $58 and has variable costs of $30 per unit. The total fixed costs are $40,000. What will be the effect on the breakeven point in units if variable costs increase by $6 due to an increase in the cost of direct materials?

Answer #1

**Break Evn Points (Units) =**
**Fixed
Costs**

**Sales price per unit - Varaible cost per
unit**

**= $40,000**

**$58 -$30**

**= $40,000/28**

**=Approx 1429 Units**

**Now if Variable cost increase by $6 Revise Break even is
as follow**

**= $ 40,000
**

**$58 - ($30 + $6)**

**= $40,000**

**$58 - $36**

**= $40,000
**

**$22**

**= Approx 1818 Units**

**So because of Increse in variable cost by $6 break even
point increase from 1429 units to 1818 units.**

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