Drenning Timber Products has estimated the following amounts for its next fiscal year: $$\begin{array} { | l | r | }
\hline \text { Total fixed expenses } & \$ 834,500 \
\hline \text { Sale price per unit } & 41 \
\hline \text { Variable expenses per unit } & 30 \
\hline
\end{array}$$ What will happen to the breakeven point (in units)if Drenning can reduce fixed expenses by $22,500?
A) The breakeven point will decrease by 2,046 units.
B) The breakeven point will decrease by 549 units.
C) The breakeven point will decrease by 750 units.
D) The breakeven point will increase by 549 units.

Question

Drenning Timber Products has estimated the following amounts for its next fiscal year: $$\begin{array} { | l | r | } 
\hline \text { Total fixed expenses } & \$ 834,500 \
\hline \text { Sale price per unit } & 41 \
\hline \text { Variable expenses per unit } & 30 \
\hline
\end{array}$$ What will happen to the breakeven point (in units)if Drenning can reduce fixed expenses by $22,500?
A) The breakeven point will decrease by 2,046 units.
B) The breakeven point will decrease by 549 units.
C) The breakeven point will decrease by 750 units.
D) The breakeven point will increase by 549 units.

Quizplus · Accepted Answer

The breakeven point will decrease by 2,046 units.The breakeven point is the point at which total revenue equals total expenses. To calculate the breakeven point, we can use the following formula:Breakeven point = Fixed expenses / (Sale price per unit - Variable expenses per unit)If Drenning can reduce fixed expenses by $22,500, the new breakeven point will be:Breakeven point = (834,500 - 22,500) / (41 - 30) = 812,000 / 11 = 73,818 unitsThe original breakeven point was 75,864 units. Therefore, the breakeven point will decrease by 2,046 units.

Drenning Timber Products Has Estimated the Following Amounts for Its