Dover Industries management has budgeted the following amounts for its next fiscal year: $$\begin{array} { | l | r | }
\hline \text { Total fixed expenses } & \$ 630,000 \
\hline \text { Sale price per unit } & \$ 30 \
\hline \text { Variable expenses per unit } & \$ 21 \
\hline
\end{array}$$ If fixed expenses increase by 10%,to maintain the original breakeven sales in units,the selling price per unit would have to be:

Question

Dover Industries management has budgeted the following amounts for its next fiscal year: $$\begin{array} { | l | r | } 
\hline \text { Total fixed expenses } & \$ 630,000 \
\hline \text { Sale price per unit } & \$ 30 \
\hline \text { Variable expenses per unit } & \$ 21 \
\hline
\end{array}$$ If fixed expenses increase by 10%,to maintain the original breakeven sales in units,the selling price per unit would have to be:

Quizplus · Accepted Answer

The original fixed expenses are $630,000. A 10% increase would make them $693,000. The contribution margin per unit is $9 ($30 - $21). To maintain the original breakeven point, the new selling price should cover the increased fixed costs. A 3% increase in the selling price would make it $30.90, which maintains the breakeven point.

Dover Industries Management Has Budgeted the Following Amounts for Its