Taizhong Semiconductor Company mass produces several common computer chips. Type A sells for $1.20 per unit. Variable cost is $0.95 per unit and the fixed costs are $32,000 per month. Taizhong currently sells 140,000 units per month. Under intense pressure to boost profits, the production manager has a plan which will reduce fixed costs by 10%. How will this affect the breakeven point in terms of units per month?

Question

Quizplus · Accepted Answer

A) Calculations:
$1.20 - $0.95 = $0.25
$32,000/$0.25 = 128,000
$32,000 × 10% = $3,200
($32,000 - $3,200)/$0.25 = 115,200
128,000 - 115,200 = 12,800

Taizhong Semiconductor Company Mass Produces Several Common Computer Chips