Mosaic Tile Company has estimated the following amounts for its next fiscal year: $$\begin{array} { | l | r | }
\hline \text { Total fixed costs } & \$ 832,000 \
\hline \text { Sales price per unit } & 44 \
\hline \text { Variable costs per unit } & 20 \
\hline
\end{array}$$ What will happen to the breakeven point (in units) if Mosaic can reduce fixed costs by $22,000? (Round your answer up to the nearest whole unit.)

Question

Mosaic Tile Company has estimated the following amounts for its next fiscal year: $$\begin{array} { | l | r | } 
\hline \text { Total fixed costs } & \$ 832,000 \
\hline \text { Sales price per unit } & 44 \
\hline \text { Variable costs per unit } & 20 \
\hline
\end{array}$$ What will happen to the breakeven point (in units) if Mosaic can reduce fixed costs by $22,000? (Round your answer up to the nearest whole unit.)

Quizplus · Accepted Answer

The breakeven point in units is calculated as Total Fixed Costs / (Sales Price per Unit - Variable Costs per Unit). Initially, it is $832,000 / (44 - 20) = 832,000 / 24 = 34,666.67$, rounded up to 34,667 units. With a $22,000 reduction in fixed costs, the new fixed costs are $810,000, leading to a new breakeven point of $810,000 / 24 = 33,750$ units. The difference is 34,667 - 33,750 = 917 units, indicating the breakeven point will decrease by 917 units.

Mosaic Tile Company Has Estimated the Following Amounts for Its