Question
If the fixed cost increase $31,500 with no other cost or revenue factors changing, what is the break even sales in units? Explanation: Cost Fixed
If the fixed cost increase $31,500 with no other cost or revenue factors changing, what is the break even sales in units?
Explanation:
CostFixedVariable
Raw material$0$150,000
Direct labor$0$100,000
Factory costs$50,000$75,000
Selling and administrative costs$55,000$25,000
Total cost$105000$350,000
Total variable cost= $350,000
No. of units = 100,000
Variable cost per unit = $350,000 / 100,000
= $3.5 per unit
Sales (100,000 units)$500,000
No of units = 100,000
Selling price per unit = $500,000 / 100,000
= $5
Therefore contribution per unit = Sales - variable cost
= $5 - $3.5
= $1.5
Break even sales in unit = Fixed cost / Contribution margin per unit
Contribution margin = $1.5
Break even sales in unit = $105,000 / 1.5
= 70,000 units
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started