Variable costing does not apply to service companies.

T/F

Kent Company manufactures a product that sells for $56.00. Fixed costs are $286,000 and variable costs are $30.00 per unit. Kent can buy a new production machine that will increase fixed costs by $22,700 per year, but will decrease variable costs by $5.50 per unit. What effect would the purchase of the new machine have on Kent's break-even point in units?

Multiple Choice

• 1,200 unit increase.

• 1,200 unit decrease.

• 4,505 unit increase.

• 2,453 unit decrease.

• No effect on the break-even point in units.