Sharon Company has variable costs of $80 per unit,total fixed costs of $200,000,and a break-even point of 5,000 units.If the sales price per unit is increased by $10,how many units must Sharon Company sell to break even?
A) 4,000 units
B) 5,000 units
C) 6,000 units
D) 3,000 units

Question

Quizplus · Accepted Answer

The original sales price per unit can be calculated using the break-even formula: Break-even point in units = Total fixed costs / (Sales price per unit - Variable cost per unit). With a break-even point of 5,000 units, we can set up the equation 5,000 = $200,000 / (P - $80), where P is the original sales price per unit. Solving for P gives us P = $120. Increasing the sales price by $10 results in a new price of $130 per unit. The new break-even point is then calculated as $200,000 / ($130 - $80) = $200,000 / $50 = 4,000 units.

Sharon Company Has Variable Costs of $80 Per Unit,total Fixed