Jarvis Foods produces a gourmet condiment which sells for $10.00 per unit. Variable costs are $7.50 per unit, and fixed costs are $18,000 per month. Jarvis is currently selling 8,000 units per month. If Jarvis is forced to reduce the selling price down to $9.00 per unit, and volume remains constant, how will that affect its breakeven point?

Question

Quizplus · Accepted Answer

A) Calculations:
$18,000 / ($10.00 - $7.50) = 7,200
$18,000 / ($9.00 - $7.50) = 12,000
12,000 - 7,200 = 4,800

Jarvis Foods Produces a Gourmet Condiment Which Sells for $10