Yemen Company has the following information available:
$\begin{array} { l }
\text {Selling price per unit }&\$100\
\text {Variable cost per unit }&\$45\
\text { Fixed costs per year}&\$420,000\
\text {Expected sales per year (units) }&20,000\
\end{array}$

If variable costs increase to $65 per unit and fixed costs increase by $200,000,what is the break-even point in units?
A) 11,273
B) 12,000
C) 20,000
D) 17,714

Question

Yemen Company has the following information available:
$\begin{array} { l  }
 \text {Selling price per unit }&\$100\
 \text {Variable cost per unit }&\$45\
 \text { Fixed costs per year}&\$420,000\
 \text {Expected sales per year (units) }&20,000\
\end{array}$

If variable costs increase to $65 per unit and fixed costs increase by $200,000,what is the break-even point in units?
A) 11,273
B) 12,000
C) 20,000
D) 17,714

Quizplus · Accepted Answer

With the new variable cost of $65 per unit and an increase in fixed costs to $620,000 ($420,000 + $200,000), the contribution margin per unit becomes $35 ($100 - $65). The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit: $620,000 / $35 = 17,714 units.

Yemen Company Has the Following Information Available If Variable Costs Increase to $65 Per Unit and Fixed