Figure 8-4
Dirth Company sells only one product at a regular price of £7.50 per unit. Variable expenses are 60 per cent of sales and fixed expenses are £30,000. Management has decided to decrease the selling price to £6.00 in hopes of increasing its volume of sales.
-Refer to Figure 8-4. What is the monetary sales level required to break even at the old price of £7.50?
A)£75,000
B)£12,000
C)£18,000
D)£50,000

Question

Quizplus · Accepted Answer

At the old price of £7.50 per unit, the contribution margin per unit would be £7.50 - (£7.50 x 60%) = £3.00.
To break even: 
BEP (in units) = Fixed Expenses / Contribution Margin per Unit 
BEP (in units) = £30,000 / £3.00 = 10,000 units
Therefore, the monetary sales level required to break even at the old price of £7.50 is: 
10,000 units x £7.50 per unit = £75,000.

Figure 8-4 Dirth Company Sells Only One Product at a Regular Price