A bag manufacturing company proposed a selling price of $80 per bag for their new range of bags. Fixed costs are $10,000 and variable costs are $40 per bag. At this point their break even point was 250 units. What will be the breakeven point if the variable costs can be brought down to $30?
A) 150 units
B) 350 units
C) 300 units
D) 200 units
E) 100 units

Question

Quizplus · Accepted Answer

The break-even point in units can be calculated using the formula: Break-even point = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). With the original variable costs at $40, the break-even point was 250 units. If the variable costs are reduced to $30, the new break-even point = $10,000 / ($80 - $30) = $10,000 / $50 = 200 units.

A Bag Manufacturing Company Proposed a Selling Price of $80