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

If Balmoral Company increases fixed expenses by $3,600,how will break-even sales in units be affected?

Question

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

If Balmoral Company increases fixed expenses by $3,600,how will break-even sales in units be affected?

Quizplus · Accepted Answer

To calculate the effect of the increase in fixed expenses on the break-even sales in units, we need to use the following formula:
Break-even sales (units) = Fixed expenses / (Selling price per unit - Variable expenses per unit)

Before the increase in fixed expenses:
Break-even sales (units) = $42,000 / ($90 - $54) = 1,400 units

After the increase in fixed expenses:
Break-even sales (units) = ($42,000 + $3,600) / ($90 - $54) = 1,640 units

The difference is an increase of 240 units (1,640 - 1,400 = 240). Therefore, the correct answer is C, Increase by 240 units.

Balmoral Company Management Has Budgeted the Following Amounts for Its