Payton Industries has fixed costs of $490,000, the unit selling price is $35, and the unit variable costs are $20.What is the break-even sale units if fixed costs are reduced by $40,000?
A)32,667 units
B)14,000 units
C)30,000 units
D)24,500 units

Question

Quizplus · Accepted Answer

To calculate the break-even point, we can use the formula:

Break-even point (in units) = Fixed costs / (Selling price per unit - Variable costs per unit)

Without the reduction in fixed costs, the break-even point would be:

Break-even point = $490,000 / ($35 - $20) = 32,667 units

With the $40,000 reduction in fixed costs, the new fixed cost amount is $450,000. So the revised break-even point is:

Break-even point = $450,000 / ($35 - $20) = 30,000 units

Therefore, the correct answer is C.

Payton Industries Has Fixed Costs of $490,000, the Unit Selling