Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. What is the breakeven point in units at the anticipated sales price next year?
A) 16,667 units
B) 6,667 units
C) 8,571 units
D) 7,143 units

Question

Quizplus · Accepted Answer

The anticipated sales price next year is $25 * 120% = $30. Variable costs are 30% of sales, so they will be $30 * 30% = $9 per unit. The contribution margin per unit will be $30 - $9 = $21. The breakeven point in units is fixed expenses divided by the contribution margin per unit, so $150,000 / $21 = 7,143 units.

Belton Company Currently Sells Its Products for $25 Per Unit