Assume the following information for Janice Company:
$$\begin{array} { l l }
\text { Selling price per unit } & \$ 100 \
\text { Variable costs per unit } & \$8 0 \
\text { Total fixed costs } & \$ 8 0,000
\end{array}$$
If fixed costs increased by 10% and management wanted to maintain the original break-even point,then the selling price per unit would have to be increased to ________.
A) $101.00
B) $102.40
C) $102.00
D) $103.00

Question

Assume the following information for Janice Company:
$$\begin{array} { l l } 
\text { Selling price per unit } & \$ 100 \
\text { Variable costs per unit } & \$8 0 \
\text { Total fixed costs } & \$ 8 0,000
\end{array}$$
If fixed costs increased by 10% and management wanted to maintain the original break-even point,then the selling price per unit would have to be increased to ________.
A) $101.00
B) $102.40
C) $102.00
D) $103.00

Quizplus · Accepted Answer

The correct answer is C.The break-even point is the point at which total revenue equals total costs. In this case, the break-even point is:```Break-even point = Total fixed costs / (Selling price per unit - Variable costs per unit)``````Break-even point = $80,000 / ($100 - $80)``````Break-even point = 1,000 units```If fixed costs increased by 10%, the new total fixed costs would be:```New total fixed costs = $80,000 * 1.10``````New total fixed costs = $88,000```To maintain the original break-even point, the new selling price per unit would have to be:```New selling price per unit = (New total fixed costs / Break-even point) + Variable costs per unit``````New selling price per unit = ($88,000 / 1,000) + $80``````New selling price per unit = $102.00```

Assume the Following Information for Janice Company If Fixed Costs Increased by 10% and Management Wanted to l