Question

The company distributes a product, packaging for moves whose selling price is $17 per unit and whose variable expense is $16 per unit. The company's monthly fixed expenses is $4,200. Be sure to show your work on the below.

1. Calculate the company's break-even point in unit sales.

2. Calculate the company's break-even point in dollar sales.

3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales?

Answer 1

1) Contribution margin per unit= Selling price per unit-Variable expense per unit

= $17-16= $1 per unit

Break even point in unit sales= Fixed expenses/Contribution margin per unit

= $4200/1= 4200 units

2) Break even point in dollar sales= Break even point in unit sales*selling price per unit

= 4200*$17= $71400

3) New fixed costs= $4200+600= $4800

Break even point in unit sales= Fixed expenses/Contribution margin per unit

= $4800/1= 4800 units

Break even point in dollar sales= Break even point in unit sales*selling price per unit

= 4800*$17= $81600

NOTE:- For any problem regarding the answer please ask in the comment section.