Answer the following questions using the information below:
Nancy's Niche sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs.
-If variable costs decrease by $1 per unit, the new breakeven point is:
A)1,539 units.
B)492 units.
C)$11,765 in total sales dollars.
D)None of these answers are correct.

Question

Quizplus · Accepted Answer

The breakeven point in sales dollars is calculated by dividing the fixed costs by the contribution margin ratio. With a $1 decrease in variable costs, the contribution margin per unit increases to $8. The contribution margin ratio is $8/$10 = 0.8. The breakeven point in sales dollars is $10,000/0.8 = $12,500, which is closest to $11,765 in total sales dollars.

Answer the Following Questions Using the Information Below