Revert Creations sells a single product at a price of $50 per unit.Fixed costs total $312,000 and variable costs per unit are $24.Revert is considering the purchase of new equipment that would reduce variable costs per unit to $21, but fixed costs would increase to $334,370.Above what volume would Revert be profitable with the new machine, assuming the selling price remains constant?

Question

Quizplus · Accepted Answer

To find the breakeven point, we need to use the following formula:

Total revenue = Total cost

Let X be the number of units sold.

Old total cost = Fixed cost + Variable cost
= $312,000 + ($24/unit)X

Old total revenue = $50X

New total cost = New fixed cost + New variable cost
= $334,370 + ($21/unit)X

New total revenue = $50X

Setting the old and new total revenue equal to the old and new total cost, we get:

$50X = $312,000 + ($24/unit)X
$50X = $334,370 + ($21/unit)X

Solving for X, we get:

X = 11,530

Therefore, Revert will be profitable with the new machine above a volume of 11,530 units.

Revert Creations Sells a Single Product at a Price of $50