Dirth Company sells only one product at a regular price of $7.50 per unit.Variable expenses are 60 percent of sales and fixed expenses are $30,000.Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales.
- What is the new break-even point in units for Dirth Company when the selling price is $6.00?

Question

Quizplus · Accepted Answer

The contribution margin per unit at the new selling price of $6.00 is $6.00 - (60% of $6.00) = $2.40. The break-even point in units is calculated by dividing the fixed expenses by the contribution margin per unit: $30,000 / $2.40 = 12,500 units. However, none of the options match this calculation, so there might be an error in the options provided.

Dirth Company Sells Only One Product at a Regular Price