Lightfoot Company sells its product for $55 and has variable costs of $30 per unit. Total fixed costs are $25 000. What will be the effect on the breakeven point if variable costs increase by 10% due to an increase in the cost of direct materials?

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The increase in variable costs by 10% raises them to $33 per unit. The new breakeven point is calculated as $25,000 / ($55 - $33) = 1,136 units. The original breakeven point was $25,000 / ($55 - $30) = 1,000 units. The increase is 136 units.

Lightfoot Company Sells Its Product for $55 and Has Variable