Question

A product has a contribution margin of $9 per unit and a selling price of $55 per unit. Fixed costs are $27,000. Assuming new technology increases the unit contribution margin by 50 percent but increases total fixed costs by $16,200, what is the new breakeven point in units?

Answer #1

New Break-even point in
units |
= |
3,200 |
units |

Workings: | |||

Existing | New | ||

Contribution margin per unit | $ 9 | $ 13.50 | ($9 X 1.50) |

Fixed cost | 27000 | 43200 | ($27000 + $16200) |

New Break-even point in units | = | Fixed costs / contribution margin | |

= | $43200 / $13.50 | ||

= | 3,200 | units |

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