Reference: 08-06
Arthur Company had the following data for the year just ended: $$\begin{array} { | l | l | }
\hline \text { Sales } & 4,000 \text { units } \
\hline \text { Sales price } & \$ 60 \text { per unit } \
\hline \text { Variable cost } & \$ 18 \text { per unit } \
\hline \text { Fixed costs } & \$ 42,000 \
\hline
\end{array}$$
-If the company's fixed costs decrease by 20% next year, all other factors remaining the same, the break-even level will change from that of the current year by (rounded your final answer to the nearest whole unit):

Question

Reference: 08-06
Arthur Company had the following data for the year just ended: $$\begin{array} { | l | l | } 
\hline \text { Sales } & 4,000 \text { units } \
\hline \text { Sales price } & \$ 60 \text { per unit } \
\hline \text { Variable cost } & \$ 18 \text { per unit } \
\hline \text { Fixed costs } & \$ 42,000 \
\hline
\end{array}$$
-If the company's fixed costs decrease by 20% next year, all other factors remaining the same, the break-even level will change from that of the current year by (rounded your final answer to the nearest whole unit):

Quizplus · Accepted Answer

The break-even point in units is calculated as Fixed Costs / (Sales price per unit - Variable cost per unit). With a 20% decrease in fixed costs, the new fixed costs would be $42,000 * 0.8 = $33,600. The break-even point would then be $33,600 / ($60 - $18) = 840 units, compared to the original break-even point of 1,050 units ($42,000 / ($60 - $18)). This is a decrease of 210 units, which rounds to a 200 unit decrease.

Reference: 08-06 Arthur Company Had the Following Data for the Year

Reference: 08-06
Arthur Company Had the Following Data for the Year