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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

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Answer #1

Answer :

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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