Question

# Break-Even Sales Currently, the unit selling price of a product is \$320, the unit variable cost...

Break-Even Sales Currently, the unit selling price of a product is \$320, the unit variable cost is \$260, and the total fixed costs are \$918,000. A proposal is being evaluated to increase the unit selling price to \$350.

a. Compute the current break-even sales (units). units

b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant. units

Contribution per unit = selling price per unit - variable cost per unit

Break-even sales ( units ) = Fixed cost / contribution per unit

a. Calculation of current break-even sales ( units )

Contribution per unit = selling price per unit - variable cost = \$320 - \$260 = \$60

Current Break-even sales ( units ) = fixed cost / contribution per unit = \$918,000 / \$60 = 15,300 units.

b. Calculation of anticipated break-even sales ( units ), when selling price is increased to \$350.

Contribution per unit = selling price - variable cost = \$350 - \$260 = \$90

Anticiapted Break-even sales ( units ) = fixed cost / contribution per unit = \$918,000 / \$90 = 10,200 units.

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