Oscar Incorporated currently sells its products for $400 per unit.Management is contemplating a 10% increase in the selling price for the next year.Variable costs are currently 20% of sales revenue and are not expected to change next year.Fixed expenses are $140,000 per year.
If fixed costs were to decrease 10% during the current year and the new selling price goes into effect,how many units will need to be sold to breakeven?

Question

Quizplus · Accepted Answer

C)
Selling Price $400
× increase × 1.10 %
Adj.Selling Price $440
Selling Price $400
Variable % × 20%
Variable Cost $80
Selling Price $440
Less Variable cost 80
Contribution Margin $360
Old Fixed Expenses $140,000
Less 10% 14,000
New Fixed Expenses $126,000
Fixed Expense $126,000/ $360 = 350 units

Oscar Incorporated Currently Sells Its Products for $400 Per Unit