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