Mae Company sells its product for $12 per unit and has variable costs of $8 per unit.Total fixed costs are $60,000.Suppose variable costs increase by 10% due to an increase in the cost of direct materials.What will be the effect on the breakeven point in units?

Question

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A)
Sales $12.00
Less Variable expenses 8.00
Contribution Margin $4.00
Fixed expense $60,000/ $4.00 CM = 15,000 BE units
Sales $12.00
Less Variable expenses 8.80
Contribution Margin $3.20
Fixed expense $60,000/ $3.20 CM = 18,750 BE units

Mae Company Sells Its Product for $12 Per Unit and Has