You currently sell a product with a variable cost per unit of $43 and a unit selling price of $69. At the present time you only sell on a cash basis and have monthly sales of 680 units. The monthly
Interest rate is .75 percent. You are considering switching to a net 30 credit policy. What is the
Switch break-even point?

Question

Quizplus · Accepted Answer

The switch break-even point is calculated by finding the additional units needed to cover the cost of offering credit. The contribution margin per unit is $69 - $43 = $26. The interest cost per unit is $69 * 0.0075 = $0.5175. The break-even point is 680 + (680 * $0.5175 / $26) = 694 units.

You Currently Sell a Product with a Variable Cost Per