If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales in units (rounded to a whole number) if the unit selling price increases by $10?
A) 6,000 units and 5,294 units
B) 18,000 units and 6,000 units
C) 18,000 units and 12,857 units
D) 9,000 units and 15,000 units

Question

Quizplus · Accepted Answer

The old break-even sales in units can be calculated as follows:
Break-even sales in units = fixed costs/ (unit selling price - unit variable cost)
Break-even sales in units = $450,000/($75 - $50) = 18,000 units

To calculate the new break-even sales, we need to use the increased unit selling price:
New unit selling price = $75 + $10 = $85
New break-even sales in units = $450,000/($85 - $50) = 12,857 units

Therefore, the answer is C as it provides both the old and new break-even sales in units after the increase in the unit selling price.

If Fixed Costs Are $450,000, the Unit Selling Price Is