Question

XYZ Company reported the following information for June:

contribution margin per unit .........  $24
fixed costs ..........................  $180,000
variable cost per unit ...............  $36

For the month of July, XYZ Company expects its fixed costs to
increase by $90,000 while the variable cost per unit will not
change (it will remain at $36 per unit).

Calculate the selling price per unit of XYZ Company's product
needed in July in order to maintain the same break-even point
in units as in June.

Answer 1

Break-even point in units in June = Fixed costs / Contribution margin per unit

= $180,000 / $24

= 7,500

July Fixed costs = $180,000 + $90,000 = $270,000

Variable cost per unit = $36

Break-even point in units in July = Fixed costs / Contribution margin per unit

7,500 = $270,000 / Contribution margin per unit

Contribution margin per unit = $270,000 / 7,500

= $36

Selling price per unit - Variable cost per unit = Contribution margin per unit

Selling price per unit - $36 = $36

Selling price per unit = $36 + $36

Selling price per unit = $72