Question

Assume the following for the Dunst Company:

Sales (10,000 units)         $400,000

Fixed expenses               $105,000

Break-even point             $350,000

If sales price increased 10% and variable expenses increased $2.00 per unit, which of the following is true?

The new break-even point is $330,000

The new selling price is $36.00 per unit

The new variable expenses are $26.00 per unit

The new break-even point is 9,000 units

Answer 1

	1)	sale price per unit =		400,000/10,000
				40
				new selling price per unit
				44
		hence option 2 is wrong
	2)	Contribution margin = 105,000/350,000
				30%
		hence variable cost per unit(original)= 40*70%
					28
		so new variable cost = 28+$2 = $30
	3)	New break even point
				105000/(44-30)
				7,500
	4)	contribution margin =		14/44
				0.318182
				105000/31.8182%
				330000
		hence option 1 is correct
		the new break even point is $330,000				answer