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?
Break Evn Points (Units) = Fixed Costs
Sales price per unit - Varaible cost per unit
=Approx 1429 Units
Now if Variable cost increase by $6 Revise Break even is as follow
= $ 40,000
$58 - ($30 + $6)
$58 - $36
= 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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