Question

Juniper Enterprises sells handmade clocks. Its variable cost per clock is $17.50, and each clock sells for $25.00. The company’s fixed costs total $12,075. Suppose that Juniper raises its price by 40 percent, but costs do not change.     

What is its new break-even point? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.)

Answer 1

Answer:

New Selling Price per unit = Old Selling price per unit + Old selling price per unit * 40%
New Selling Price per unit = $25 + $25*40%
New Selling Price per unit = $25 + $10
New Selling Price per unit = $35

Contribution Margin per unit = New Selling Price per unit – Variable cost per unit
Contribution Margin per unit = $35 - $17.50
Contribution Margin per unit = $17.50

New Break Even Point = Fixed Cost / Contribution Margin per unit
New Break Even Point = $12,075 / $17.50
New Break Even Point = 690 unit