The selling price of one unit of a product made by Ellis Corp. is $4.50. Variable cost per unit is $1.50. Fixed costs per period are $150,000. Ellis' variable costs increase by 20% and fixed costs decrease by 5%. These changes will cause the company BEP to

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The original contribution margin per unit is $3.00 ($4.50 - $1.50). After a 20% increase, the variable cost per unit becomes $1.80, reducing the contribution margin per unit to $2.70 ($4.50 - $1.80). The original fixed costs are $150,000, and after a 5% decrease, they become $142,500. The original break-even point in units is $150,000 / $3.00 = 50,000 units. The new break-even point is $142,500 / $2.70 = 52,778 units. The increase in the break-even point is 2,778 units.

The Selling Price of One Unit of a Product Made