Martin Company currently sells its products for $220 per unit.Management is contemplating a 20% increase in the selling price for the next year.Variable costs are currently 40% of sales revenue and are not expected to change next year.Fixed expenses are $120,000 per year.
If fixed costs increase 10% next year,and the new selling price per unit goes into effect,how many units will need to be sold to breakeven?

Question

Quizplus · Accepted Answer

A)
Fixed Expense $120,000
× increase × 1.10%
Adj.Fixed exp $132,000
Selling Price $220
× increase × 1.20 %
Adj.Selling Price $264
Selling Price $220
Variable % × 40%
Variable Cost $88
Selling Price $264
Less Variable cost 88
Contribution Margin $176
Fixed Expense $132,000/ $176 = 750 units

Martin Company Currently Sells Its Products for $220 Per Unit