Sequoah Company sells its product for $60 and has variable costs of $31 per unit.The total fixed costs are $35,000.What will be the effect on the breakeven point in units if variable costs increase by $6 due to an increase in the cost of direct materials?
A) It will increase by 315 units.
B) It will decrease by 315 units.
C) It will decrease by 207 units.
D) It will increase by 207 units.

Question

Quizplus · Accepted Answer

A) Breakeven point (before increase in cost of direct materials) = $35,000 / ($60 - $31) = 1,207 units
Breakeven point (after increase in cost of direct materials) = $35,000 /
($60 - $37) = 1,522 units
Increase in breakeven point = 1,522 - 1,207 = 315 units

Sequoah Company Sells Its Product for $60 and Has Variable