Busson Company management has budgeted the following amounts for its next fiscal year:

If Busson Company can reduce fixed expenses by $10,300,how will break-even sales in units be affected?

Question

Busson Company management has budgeted the following amounts for its next fiscal year:

If Busson Company can reduce fixed expenses by $10,300,how will break-even sales in units be affected?

Quizplus · Accepted Answer

The break-even point in units is calculated by dividing the total fixed expenses by the contribution margin per unit (contribution margin = price per unit - variable cost per unit). If fixed expenses are reduced by $10,300, the new total fixed expenses will be $80,700 ($91,000 - $10,300). Assuming the contribution margin per unit remains the same, the break-even point in units will decrease from 8,050 to 7,535, which is a decrease of 515 units. Therefore, the correct answer is C: Decrease by 515 units.

Busson Company Management Has Budgeted the Following Amounts for Its