Preston Milled Products currently sells a product with a variable cost per unit of $21 and a unit selling price of $40.At the present time,the firm only sells on a cash basis with monthly sales of 2,800 units.The monthly interest rate is 0.5 percent.What is the switch break-even point if the firm switched to a net 30 credit policy? Assume the selling price per unit and the variable costs per unit remain constant.
A)2,830 units
B)2,910 units
C)3,333 units
D)3,414 units
E)3,526 units

Question

Quizplus · Accepted Answer

Break-even point = Q′ - 2,800 = ($40 × 2,800)/{[($40 - $21)/0.005] - $21} = 30 unitsQ′ = 2,800 + 30 = 2,830 units

Preston Milled Products Currently Sells a Product with a Variable