EX 21-13 Break-even sales

Currently, the unit selling price of a product is $125, the unit variable cost is $105, and the total fixed costs are $460,000. A proposal is being evaluated to increase the unit selling price to $130.

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


Answer:

a. Break-Even Sales (units) =
Fixed Costs
Unit Contribution Margin
Break-Even Sales (units) = $460,000
$125 – $105
= 23,000 units
b. Break-Even Sales (units) = Fixed Costs
Unit Contribution Margin
Break-Even Sales (units) = $460,000
$130 – $105 = 18,400 units