Samson Company currently sells its products for $50 per unit.Management is contemplating a 20% increase in the selling price for the next year.Variable costs are currently 40% of sales revenue and are not expected to change next year.Fixed expenses are $80,000 per year. What is the breakeven point in units at the anticipated selling price per unit next year?

Question

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit with the anticipated selling price:
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $50 x (1 + 0.2) - $50 x 40% = $30

Next, we can use the breakeven formula:
Breakeven point in units = Fixed expenses / Contribution margin per unit
Breakeven point in units = $80,000 / $30 = 2,667 units

Therefore, the answer is (A) 2,667 units.

Samson Company Currently Sells Its Products for $50 Per Unit