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Sequoah Company sells its product for $58 and has variable costs of $30 per unit. The...

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?

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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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