Kent Manufacturing produces a product that sells for $50.00.Fixed costs are $260,000 and variable costs are $24.00 per unit.Kent can buy a new production machine that will increase fixed costs by $11,400 per year,but will decrease variable costs by $3.50 per unit.What effect would the purchase of the new machine have on Kent's break-even point in units?
A)800 unit increase.
B)800 unit decrease.
C)5,714 unit increase.
D)4,444 unit decrease.
E)No effect on the break-even point in units.

Question

Quizplus · Accepted Answer

The new machine increases fixed costs by $11,400 but decreases variable costs by $3.50 per unit. The decrease in variable costs reduces the break-even point, resulting in an 800 unit decrease.

Kent Manufacturing Produces a Product That Sells for $50